internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp b05-plr-125548-02 date date in re legend distributing controlled shareholder shareholder shareholder shareholder shareholder shareholder shareholder shareholder plr-125548-02 shareholder shareholder shareholder group shareholder group director director a b state x city city date date date year year year a b c plr-125548-02 d e f g h i j k l m n dear this letter responds to a request for a private_letter_ruling dated date submitted by you on behalf of distributing with respect to certain federal_income_tax consequences of a proposed transaction additional information was received in letters dated date date and date the rulings in this letter are based on the facts and representations submitted under penalties of perjury in support of the request verification of that information may be required as part of the audit process the material information is summarized below distributing is a state x corporation that was incorporated on date more than years ago from year through year distributing was engaged in the a business in year distributing discontinued it’s a business and began to engage in the b business in the area surrounding city from year to year director served as an officer and director of distributing was the majority shareholder of distributing and managed distributing’s b business director also served as an officer and director of distributing was a shareholder of distributing and primarily conducted clerical services for distributing plr-125548-02 by year director and director had transferred all of their shares of distributing stock to the shareholder group and the shareholder group shareholder served as a director and officer of distributing as did director and director the shareholder group includes shareholder owning a of distributing stock shareholder owning b of distributing stock shareholder owning c of distributing stock shareholder owning b of distributing stock and shareholder owning c of distributing stock the shareholder group includes shareholder owning a of distributing stock shareholder owning d of distributing stock shareholder owning e of distributing stock shareholder owning f of distributing stock and shareholder owning g of distributing stock in year differences arose between shareholder and shareholder over the focus and direction for distributing’s b business in an effort to resolve these differences distributing incorporated controlled as a state x corporation and on date transferred approximately h of its b business_assets in exchange for i shares of controlled stock shareholder director and director were elected as the officers and directors of controlled however by year it became apparent that shareholder and shareholder could no longer operate the b businesses of distributing and controlled within the same corporate group in order to allow shareholder and shareholder to separately operate the b businesses of distributing and controlled the shareholders of distributing wish to distribute all of distributing’s controlled stock to the shareholder group in exchange for all of their distributing stock shareholder will receive j shareholder will receive k shareholder will receive l shareholder will receive m and shareholder will receive n of the stock in controlled financial documentation has been submitted which indicates that the b business conducted by distributing has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years in addition financial documentation has been submitted which indicates that the b business conducted by controlled has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business since date in connection with the transaction it has been represented that a b the fair_market_value of the controlled stock and other consideration to be received by each shareholder of distributing will be approximately equal to the fair_market_value of the distributing stock surrendered by each shareholder in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation plr-125548-02 c d e f g h i j the gross assets of distributing used in the b business have a market_value which is in excess of five percent of its gross assets and after the proposed transaction the gross assets of distributing and controlled which are used in the b business will have a fair_market_value which is in excess of five percent of each of distributing and controlled’s gross assets the years of financial information submitted on behalf of distributing is representative of the corporation’s present operations and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted the gross assets of controlled used in the b business have a market_value which is in excess of five percent of its gross assets and after the proposed transaction the gross assets of distributing and controlled which are used in the b business will have a fair_market_value which is in excess of five percent of each of distributing and controlled’s gross assets following the transaction distributing and controlled will each continue the active_conduct of its business independently and with its separate employees the distribution of the stock of controlled will be carried out for the following business_purpose to separate the management of the b business among the shareholders of distributing to resolve management problems the distribution of the stock of controlled is motivated in whole or substantial part by this corporate business_purpose distributing is not an s_corporation within the meaning of sec_1361 and there is no plan or intentions by distributing or controlled to make an s_corporation_election pursuant to sec_1362 there is no plan or intention by the shareholders or security holders of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of distributing or controlled after the proposed transaction there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the proposed transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 plr-125548-02 k l m n o p q r s there is no plan or intention to liquidate distributing or controlled or to merge any of those corporations with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business the total adjusted bases and the fair_market_value of the assets to be transferred to controlled by distributing equals or exceeds the sum of the liabilities assumed as determined under sec_357 by controlled plus any liabilities to which the transferred assets are subject the liabilities assumed as determined under sec_357 in the proposed transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred the income_tax_liability for the taxable_year in which the investment_credit_property if any including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect before amendment by public law title 104_stat_1388 if applicable to reflect an early disposition of the property distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the proposed transaction no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the proposed transaction payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the proposed transaction are investment companies as defined in sec_368 and iv the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire except as allowed by sec_355 directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled t following the proposed transaction no person will hold disqualified_stock plr-125548-02 within the meaning of sec_355 in either distributing or controlled which constitutes a percent or greater interest within the meaning of sec_355 in such corporation director and director will cease to serve as directors and officers of both distributing and controlled as of the date that the proposed transaction is complete distributing controlled and the shareholders of distributing will each pay their own expenses if any incurred in connection with the proposed transaction the cash and investment_assets held by distributing and held by controlled are related to the reasonable needs of the conduct of the active trade_or_business of each corporation u v w based solely on the information submitted and the representations set forth above we rule as follows regarding the transaction no gain_or_loss will be recognized by distributing upon the distribution of all of its controlled stock to the shareholders comprising the shareholder group in exchange for all of their distributing stock sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the shareholders comprising the shareholder group upon the receipt of the controlled stock in exchange for all of their distributing stock sec_355 the holding_period of the controlled stock received by the shareholders comprising the shareholder group will include the holding_period of the distributing stock with respect to which the distribution will be made provided the distributing stock is held as a capital_asset on the date of the distribution sec_1223 the basis of the controlled stock in the hands of the shareholders comprising the shareholder group after the distribution will equal the basis of the distributing stock surrendered in exchange therefor sec_358 no opinion is expressed about the tax treatment of the transaction under any other provision of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered in the above rulings plr-125548-02 a copy of this letter must be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the transaction covered by this ruling letter is consummated this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to distributing sincerely debra l carlisle chief branch office of associate chief_counsel corporate cc


t c memo united_states tax_court john henry besaw petitioner v commissioner of internal revenue respondent docket no filed date john henry besaw pro_se alicia h eyler lisa m oshiro and julie l payne for respondent memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies and penalties as follows year deficiency dollar_figure dollar_figure penalty sec_6662 dollar_figure dollar_figure the issues for decision are whether petitioner is entitled to deductions claimed for wages travel and meals and entertainment m e business_expenses for and beyond those allowed during an audit and whether he is liable for the accuracy-related_penalties unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference at the time his petition was filed petitioner resided in washington state for the years in issue petitioner worked as an adjunct professor of business at various universities and colleges he also operated two businesses john besaw ph d jbp which provided management and consulting services and rapidleansixsigma rlss which provided coaching and teaching in addition to management and consulting services petitioner had a personal checking bank account ending in in and from this account he made several transfers to an account ending in that totaled dollar_figure in and dollar_figure in petitioner agrees that the transfers were to his daughter jenny besaw during the years in issue petitioner financially supported his daughter in her motorcycle-racing interests on her original income_tax returns for and jenny besaw did not report as taxable_income any payments that she received from her father later during the examination of petitioner’s returns described below jenny besaw filed amended returns for those years petitioner and his wife jointly filed federal_income_tax returns on schedules c profit or loss from business they reported the following jbp rlss item gross_income dollar_figure dollar_figure big_number -0- big_number big_number travel_expenses m e expenses wage expenses total expenses including other expenses net_profit_or_loss dollar_figure big_number big_number big_number dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number the internal_revenue_service irs selected petitioner’ sec_2010 and sec_2011 tax returns for examination petitioner provided to the irs copies of a form_1096 annual summary and transmittal of u s information returns and forms 1099-misc miscellaneous income the form_1096 reported john besaw as the filer and the forms 1099-misc reported nonemployee compensation from rlss to recipients as follows recipient compensation jenny besaw phil borland dan martin annabelle canlas christine young total dollar_figure big_number big_number big_number big_number big_number the irs attempted to verify the forms 1099-misc through searches on its database but found no record of them through these searches however the irs was able to conclude that taxpayer identification numbers on some of the forms 1099-misc that petitioner presented were erroneous or missing the irs allowed petitioner some business_expense deductions for rlss but disallowed in their entirety deductions for wages travel and m e expenses for the years in issue the irs allowed all jbp deductions including wages travel and m e expenses opinion sec_162 allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business for an expenditure to be an ordinary and necessary business_expense generally the taxpayer must show a bona_fide business_purpose for the expenditure and there must be a proximate relationship between the expenditure and the business_of_the_taxpayer see 37_tc_650 see also sec_1_162-1 income_tax regs personal_living_and_family_expenses are generally not deductible sec_262 taxpayers are required to maintain sufficient records to establish the amount and purpose of any deduction sec_6001 116_tc_438 sec_1_6001-1 e income_tax regs they also have the burden of proving their entitlement to deductions claimed rule a see 292_us_435 512_f2d_882 9th cir aff’g tcmemo_1972_133 see also lyseng v commissioner tcmemo_2011_226 slip op pincite in general taxpayers must substantiate claimed deductions with evidence such as invoices or receipts that establish that the expenses were actually incurred the burden may shift to the commissioner under sec_7491 and but petitioner did not satisfy conditions for that shift particularly the substantiation requirements and maintenance of all required records the burden_of_proof therefore remains with petitioner petitioner repeatedly argues about events that occurred during the audit and complains about the court’s refusal to consider those arguments however this proceeding is a trial de novo and we do not look behind the statutory notice see 62_tc_324 the results of audits for other years are also irrelevant see rosemann v commissioner tcmemo_2009_185 slip op pincite citing auto club of mich v commissioner 353_us_180 and 55_tc_28 for the proposition that each taxable_year stands alone and the commissioner may challenge in a succeeding year what was condoned or agreed to in a previous year petitioner also argues that the record shows that he incurred and paid the rlss expenses for wages m e and travel and that these expenses were ordinary and necessary for this business focusing on wage expenses he asserts that his testimony--corroborated by forms 1099-misc for and and his personal checking account bank statements for those years--establishes that payments were indeed made to the independent contractors he alleges that the bank statements show specific information for each payment and also reflect that certain withdrawals were converted to either british pounds for payments to phil borland or philippine pesos for payments to annabelle canlas petitioner’s description of the record is erroneous petitioner claims that his daughter jenny besaw served as webmaster for one of his business web sites and that electronic funds transfers reflected in the bank statements prove that he paid her dollar_figure for her services in both and he also asserts in his brief that he provided respondent and the court with the and schedules c of jenny besaw’s income_tax returns which show that the dollar_figure payment from him for each year was reported as income additionally he asserts that the court was provided with christine young’ sec_2010 and sec_2011 schedules c which show that she too reported her rlss payments as income petitioner did not offer in evidence any schedules c for jenny besaw or christine young there are no forms 1099-misc for in the record--only a summary of the contract labor expense that petitioner reconstructed due to lost working papers he referred at trial to the schedules c of his daughter and christine young only with relation to their social_security numbers but correct social_security numbers for those two does not substantiate the payments made to them or correct inaccurate taxpayer information on other forms misc petitioner did not address the discrepancy between the dollar_figure of rlss nonemployee compensation he allegedly reported on the forms 1099-misc and the dollar_figure of wage expenses he reported for rlss for in any event neither the summary nor the forms 1099-misc for establish that the independent contractors were actually paid the statements from petitioner’s personal bank account are incomplete they contain four unexplained gaps each running from one to over two months within the years in issue petitioner did not identify any specific withdrawals or transfers in these bank records as payment to the independent contractors and the statements do not show any currency conversions the parties agree that petitioner’s transfers to the bank account ending in were transfers to jenny besaw petitioner admits to financially supporting his daughter in her personal endeavors and he does not establish what portion if any of the transfers was not familial he also failed to corroborate his testimony regarding the business_purpose of the transfers with any other evidence such as web site documentation or testimony by jenny besaw applicable regulations define a transfer of property made in the ordinary course of business as a transaction which is bona_fide at arm’s length and free from any donative_intent sec_25_2512-8 gift_tax regs a transfer of property between family members normally receives close scrutiny see eg 98_tc_554 but can be treated as one in the ordinary course of business if it meets the criteria set forth above see 436_f2d_1327 5th cir petitioner however did not show that his transfers to his daughter met these requirements for the travel and m e expense deductions petitioner similarly relies on his testimony while asserting that it is supported by corroborating evidence such as bank statements credit card statements receipts electronic logs trip sheets travel itineraries statements of expense a personal calendar summary sheets and spreadsheets however some of these professed documents were either not provided or not received in evidence receipts were not provided and credit card statements failed to show a name or an account number most of the meals were not reflected on his calendars petitioner acknowledges that he did not keep receipts for any meals costing less than dollar_figure his series of self-generated spreadsheets is insufficient to prove that he actually incurred and paid the reported expenses or that they were ordinary and necessary the spreadsheets certainly fail to satisfy the stringent requirements of sec_274 which call for additional and contemporaneous substantiation establishing the amount time place and business_purpose of expenditures see sec_274 flush language see also sec_1_274-5t and c and temporary income_tax regs fed reg date consequently there is only petitioner’s testimony that he correctly claimed the rlss deductions for wages travel and m e expenses--but that testimony is implausible and inconsistent for example petitioner testified that on date he was having a business meeting in tacoma washington but then later attested that he was on a business trip in spokane washington from january he admitted to claiming meal expense deductions both by specific items and at per_diem rates while offering no evidence to show that he did not duplicate expenses petitioner failed to explain credibly how the rlss expenses were distinguishable from the wages travel and m e expenses claimed for jbp which were allowed during the audit he has not persuaded us that certain expenses were not deducted twice petitioner’s unsupported self-serving and inconsistent testimony does not provide a basis upon which the court could permit the disallowed deductions we are not required to accept his testimony and we do not see 449_f2d_311 9th cir holding that a court is not bound to accept uncontroverted testimony at face value if it is improbable unreasonable or questionable aff’g tcmemo_1969_48 87_tc_74 bennett v commissioner tcmemo_1997_145 slip op pincite aff’d without published opinion 141_f3d_1149 1st cir petitioner’s uncorroborated testimony is simply unreliable his misstatements of the record add further doubt to his credibility we hold that petitioner did not properly substantiate any of his disputed business_expenses and thus is not entitled to any of the disallowed business_expense deductions sec_6662 penalties sec_6662 and b and imposes a accuracy-related_penalty on any underpayment of federal_income_tax which is attributable to a taxpayer’s negligence or a substantial_understatement_of_income_tax an understatement of income_tax is substantial if it exceeds the greater of of the tax required to be shown on the return or dollar_figure sec_6662 under sec_7491 the commissioner bears the burden of production with regard to penalties and must come forward with sufficient evidence indicating that it is appropriate to impose penalties higbee v commissioner t c pincite respondent asserts that petitioner is liable for the penalties because of substantial understatements of income_tax for the years in issue or negligence because we have concluded that petitioner is not entitled to any of the disallowed deductions the understatements for and remain in excess of dollar_figure which is greater than of the tax required to be shown on petitioner’s return for each year as these understatements are substantial respondent’s burden of going forward has been satisfied and we need not address negligence once the commissioner has met the burden of production the taxpayer must come forward with persuasive evidence that the penalty is inappropriate--for example by showing that he or she acted with reasonable_cause and in good_faith sec_6664 higbee v commissioner t c pincite the decision as to whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all of the pertinent facts and circumstances see sec_1_6664-4 income_tax regs petitioner argues that he relied on guidance provided in irs publications and by an irs examiner to claim the disallowed deductions he alleges that the same examiner who had previously accepted his documentation during audits of his and tax returns was told by her manager to disallow the deductions in issue he does not contend that he consulted any other tax professional neither the irs’ publications nor its agents are authoritative sources of federal tax law see 381_us_68 congress not the commissioner prescribes the tax laws 330_f2d_91 9th cir nor can any interpretation by taxpayers of the language used in government pamphlets act as an estoppel against the government nor change the meaning of taxing statutes aff’g tcmemo_1963_196 moreover a revenue_agent does not have the authority to bind the commissioner see hodel v commissioner tcmemo_1996_348 slip op pincite by claiming business_expense deductions without keeping adequate_records petitioner a well- educated man has failed to show that he acted with reasonable_cause or in good_faith we therefore sustain the sec_6662 penalty for each year we have considered other arguments of the parties but they are irrelevant unsupported by the record or by authority or otherwise without merit to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service mc 4929chi simpson south dearborn street chicago il tax_exempt_and_government_entities_division number release date october legend org organization name org address certified mail tax_court dear uil xx date address address xyz state employer identification person to contact id taxpayer advocate’s office and telephone number last date to file a petition in this is a final adverse determination that you do not qualify for exemption from income_tax under sec_501 of the internal_revenue_code i r c as an organization described in sec_501 in addition you do not qualify as an organization described in sec_509 internal_revenue_service recognition of your status as an organization described in r c sec_501 is revoked effective january 20xx our adverse determination is made for the following reason s you have not established you operate exclusively for exempt purposes within the meaning of sec_501 specific facts that contributed to this determination included your organization has not established that it is observing the conditions for continuation of its exempt status in order to maintain exempt status an organization must be operated exclusively for an exempt_purpose information obtained from the xyz secretary of state indicates that your organization has been administratively dissolved is not currently operating for an exempt_purpose and has been inactive since october of 20xx contributions made to you are no longer deductible as charitable_contributions by donors for purposes of computing taxable_income for federal_income_tax purposes see revproc_82_39 1982_2_cb_759 for the rules concerning the deduction of contributions made to you between january 20xx and the date a public announcement such as publication in the internal_revenue_bulletin is made stating that contributions to you are no longer deductible you are required to file income_tax returns on form_1120 for all years beginning after january 20xx returns for the years ending december 20xx december 20xx december 20xx must be filed with this office within days from the date of this letter unless a request for an extension of time is granted send such returns to the following address tax returns for subsequent years are to be filed with the appropriate campus identified in the instructions for those returns if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the district_court of the united_states for the district of columbia the united_states court of federal claims or the united_states tax_court before the ' day after the date this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment you may write to the tax_court at the following address the processing of income_tax returns and assessment of any taxes due will not be delayed because a petition for declaratory_judgment has been filed under sec_7428 if you have questions about this letter please write to the person whose name and address are shown on this letter if you write please attach a copy of this letter to help identify your account keep a copy for your records also please include your telephone number and the most convenient time for us to call so we can contact you if we need additional information you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers or you can contact the taxpayer_advocate office located nearest you at the address and telephone number shown in the heading of this letter taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 this is a final revocation letter sincerely vicki l hansen acting director eo examinations enclosures pub internal_revenue_service date date org address department of the treasury te_ge exempt_organizations examinations sw third avenue m s portland oregon taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter rev catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely marsha a ramirez director eo examinations enclosures publication publication report of examination letter rev catalog number 34809f schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended org december 20xx legend org organization name city president president xx date xyz state address address city issue whether org qualifies for exemption under sec_501 of the internal_revenue_code code facts ein was recognized as an organization exempt under sec_501 of the code in may was incorporated on april 19xx additionally org 19xx according to the articles of incorporation the xyz secretary of state’s website provides that the organization was administratively dissolved on october 20xx xyz revised statutes sec_65 provides that a corporation administratively dissolved may apply to the secretary of state for reinstatement within five years from the date of dissolution the internal revenue service’s irs records show that ended december 20xx has not filed a form_990 since the tax period on march 20xx letter was sent to the the initial appointment and included an information_document_request idr requesting specific documents from the organization the letter provided that the appointment would be may and 20xx at address city xyz the address is the last_known_address on file with the irs for the organization the letter was returned to the agent as not deliverable no response was received from president the agent went to the above address on may 20xx however the organization no longer exists at that address and president was not there and last known president the letter was to set up on may 20xx letter was sent to and president via certified mail the letter requested that attend an appointment on june 20xx at the irs office the letter addressed to was returned as undeliverable on may 20xx the return receipt was received for the letter which was sent to president the receipt was dated may 20xx and provided that the letter was received by president on may 20xx a phone call was received from president he provided that operations in 20xx and had filed articles of dissolution with the state of xyz he also provided that the assets of the organization were donated to another nonprofit organization the agent requested that he provide a copy of the articles of dissolution and a written_statement which provides a list of assets and how those assets were disposed of information to be returned by june 20xx no response has been received from this request to date letter and an idr were sent to president requesting the above had discontinued on august 20xx the examiner sent by certified mail a written notice the demand letter to the exempt_organization requesting the form_990 for the tax period ending december 20xx to be filed with the area office within days of the date of the demand letter the letter was sent to president's address since previous correspondence sent to the organization's address on file with the irs has been returned as undeliverable the demand letter informed the exempt_organization of the dollar_figure per day dollar_figure per day for organizations having gross_receipts exceeding dollar_figure for the subject tax_year penalty imposed by sec_6652 c and solicited a written_statement explaining the cause for late filing because the exempt_organization is exempt under sec_501 and the form_990 is required by sec_6043 the demand letter also notified the exempt_organization that if it fails without form 886-a catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer reasonable_cause to file the form_990 its exempt status will be revoked because it failed to establish it is observing the conditions required for continuation of exempt status december 20xx tax identification_number year period ended org on november 20xx the examiner visited the xyz secretary of state’s website to determine if articles of dissolution had been filed by the organization yet according to the website the organization has still not filed articles of dissolution and the status of the organization is administratively dissolved law internal_revenue_code sec_501 of the code exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 of the code provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_6043 of the code provides that every organization which for any of its last taxable years preceding its liquidation dissolution termination or substantial_contraction was exempt from taxation under sec_501 shall file such return and other information with respect to such liquidation dissolution termination or substantial_contraction as the secretary shall by forms or regulations prescribe income_tax regulations regulations sec_1_501_c_3_-1 of the regulations provide that an organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt_purpose an organization's assets will be considered dedicated to an exempt_purpose for example if upon dissolution such assets would by reason of a provision in the organization's articles or by operation of law be distributed for one or more exempt purposes or to the federal government or to a state_or_local_government for a public purpose or would be distributed by a court to another organization to be used in such manner as in the judgment of the court will best accomplish the general purposes for which the dissolved organization was organized however an organization does not meet the organizational_test if its articles or the law of the form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page _2 schedule number or exhibit form 886-a rev date name of taxpayer tax identification_number year period ended explanations of items org state in which it was created provide that its assets would upon dissolution be distributed to its members or shareholders december 20xx sec_1_6001-1 of the regulations in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 of the code and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 of the regulations states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6033-1 of the regulations provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and sec_6033 section sec_1_6033-2 of the regulations provides that an organization which is exempt from taxation under sec_501 and is not required to file annually an information_return required by this section shall immediately notify in writing the district_director for the internal_revenue_district in which its principal office is located of any changes in its character operations or purpose for which it was originally created section sec_1_6033-2 of the regulations provides that every organization which is exempt from tax whether or not it is required to file an annual information_return shall submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status and administering the provisions of subchapter_f sec_501 and following chapter of subtitle a of the code sec_6033 and chapter of subtitle d of the code section sec_1_6033-2 of the regulations provides that an organization which has established its exemption from taxation under sec_501 including an organization which is relieved under sec_6033 and this section from filing annual returns of information is not relieved of the duty_of filing other returns of information revenue rulings revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting form 886-a catalog number 20810w page_ publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items org name of taxpayer requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax december 20xx tax identification_number year period ended taxpayer's position was sent a letter dated august 20xx requesting that they file a form_990 for the tax period ended december 20xx no response has been received from the taxpayer regarding the above stated letter government’s position in accordance with sec_6001 and of the code and regulations organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax additionally these requirements provide that an organization must submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status and administering the provisions of subchapter_f sec_501 and following chapter of subtitle a of the code sec_6033 and chapter of subtitle d of the code has not filed form_990 for the tax period ended december 20xx as required under sec_6033 of the code additionally the organization has not provided adequate_records to show that they have complied with sec_6001 and sec_6033 of the code and regulations requests for records were made to documentation has been received to date which fulfills these requests and president on march 20xx may 20xx may 20xx and august 20xx no additionally the organization has not provided the irs with specific information regarding dissolution as required under sec_6043 of the code to qualify for exemption under sec_501 of the code and sec_1_501_c_3_-1 of the regulations the organization’s assets must be dedicated to an exempt_purpose distributed for an exempt_purpose has not provided sufficient documentation to show that their assets have been conclusion it is the government’s position that to be recognized as exempt from federal_income_tax under c of the internal_revenue_code accordingly the organization's exempt status is revoked effective january 20xx failed to meet the requirements under sec_6001 and sec_6033 form_1120 returns should be filed for all tax periods after january 20xx form 886-a catalog number 20810w page _4 publish no irs gov department of the treasury-internal revenue service


t c memo united_states tax_court robert wish and erin wish riehs petitioners v commissioner of internal revenue respondent docket no filed march r examined ps’ tax_return and issued a notice_of_deficiency anticipating an assessment ps posted a cash bond with r ps subsequently filed a refund claim for the tax_year the proceeds of which were to be used to offset any shortfall between the bond and the assessment r denied the refund claim and the assessment exceeded the bond ps then filed a claim for an abatement of interest for the tax_year ps supported their abatement claim with allegations of errors or delays occurring during the processing of their refund claim for r denied their claim_for_abatement of interest held the delay in payment of the outstanding tax_liability was not attributable to procedures involved in the processing of the refund claim for so as to allow relief under sec_6404 i r c -- - joseph mudd and linas n udrys for petitioners gary m slavett for respondent memorandum findings_of_fact and opinion vasquez judge on date respondent issued a notice of final_determination denying petitioners’ request for an abatement of interest under sec_6404 for their tax_year ’ the issue for decision is whether respondent abused his discretion in failing to abate the assessment of interest findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time the petition was filed petitioners resided in laguna hills california tax_return during petitioners invested in a partnership known as hillcrest securities respondent examined petitioners’ tax_year concentrating on petitioners’ tax treatment of their partnership_interest in hillcrest securities on date respondent issued a notice_of_deficiency for references to sec_6404 are to sec_6404 before amendment by sec_301 of the taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 unless otherwise stated all other section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure - on date anticipating that respondent would assess a deficiency for the tax_year petitioners deposited dollar_figure with respondent in the form of a bond petitioners requested that respondent apply dollar_figure to the deficiency and dollar_figure to penalties on date respondent assessed the deficiency for in the amount of dollar_figure respondent also assessed a negligence_penalty in the amount of dollar_figure and interest in the amount of dollar_figure pursuant to sec_6621 subsequently repealed by the omnibus budget reconciliation act of publaw_101_239 sec b 103_stat_2106 on date because the bond was insufficient to offset the deficiency_interest and penalty assessed respondent mailed petitioners a reminder of unpaid tax for the tax_year the reminder stated that petitioners had an outstanding balance of dollar_figure with regard to the assessment for the tax_year including additional interest petitioners expected to pay the remaining liability from proceeds of a refund claim for the tax_year on date respondent issued a notice_of_intent_to_levy with regard to the assessment for the tax_year in date mr wish contacted specialist todd brunk of respondent’s problem resolution office to request a hold on dollar_figure dollar_figure dollar_figure - dollar_figure dollar_figure the dollar_figure represented additional interest accrued from the date of assessment to the date of the notice q4e- collection based upon petitioners’ refund claim for on date specialist brunk accommodated petitioners and placed a collection hold on the outstanding balance for the tax_year until date because petitioners requested and were granted extensions the collection hold remained in place until at least date and amended tax returns on date petitioners filed a form 1040x amended u s individual_income_tax_return for seeking a refund of dollar_figure by carrying back a dollar_figure net_operating_loss generated in another tax_year on date respondent mailed a notice to petitioners stating that their refund claim was incomplete and requesting the year in which the net_operating_loss allegedly was generated in conjunction with the amended_return on date petitioners filed a form 1040x for claiming additional losses of dollar_figure the additional losses created a net_operating_loss for in the amount of dollar_figure of which they had carried back dollar_figure to on date respondent mailed petitioners a letter stating that the form 1040x for was being processed on date petitioners filed a second form 1040x for sometime after the date of assessment for the tax_year and prior to specialist brunk's granting mr wish’s request petitioners’ attorney had also requested a hold on collection for petitioners’ tax_year the irs granted that request - - claiming a refund of only dollar_figure examination on date respondent advised petitioners that their amended_return and by implication their refund claim for were being reviewed by examiner monte kruse examiner kruse issued various information document requests idr's to petitioners received the relevant information and evaluated several tax issues on date examiner kruse issued a 30-day_letter proposing a deficiency for the tax_year with regard to various issues in the 30-day_letter examiner kruse stated that petitioners’ claim for additional losses had been considered however he allowed only dollar_figure of those losses because examiner kruse proposed additional income items the allowed loss did not create a refund or generate net operating losses to be carried back to appeals on date petitioners verbally requested that respondent’s appeals_office appeals review the tax_year on date examiner kruse prepared a special handling notice to forward petitioners’ materials to appeals on on the date form 1040x petitioners reduced the net_operating_loss_carryback from to dollar_figure this amendment created a smaller refund request references to the refund claim for are to both the date form 1040x and the date form 1040xx -- - date petitioners filed a written protest and request for appeals to review the case on date appeals received the materials related to petitioners’ case in february or march of because examiner kruse had not prepared a revenue_agent report rar the case was sent back to respondent’s examination_division second_examination revenue_agent jimmy bose was assigned to petitioners’ case beginning in date agent bose issued idr's to petitioners and prepared draft rar's on date agent bose prepared a complete rar with explanations for the tax_year petitioners and agent bose continued working toward a resolution of the case on date agent bose issued another idr and on date issued a summons to petitioners on date agent bose prepared a rar with regard to the tax_year disallowing the net_operating_loss_carryback from and denying the claimed refund for on date respondent issued a notice_of_deficiency to petitioners for their tax_year on date petitioners filed a petition with this court seeking a redetermination of the deficiency for as determined by respondent on date respondent issued an official notice of disallowance of the claimed refund for on date the court entered a stipulated decision - j- with regard to the tax_year providing for an overpayment of dollar_figure interest abatement claim for on date petitioners filed a request for abatement of interest interest abatement claim with respondent in the interest abatement claim petitioners stated that due to the appearance that there was a realistic possibility of substantial refund for with interest in an amount sufficient to pay all of the remaining liability problem resolution agreed that the case would be placed on hold petitioners asserted that the audit however became a substantial comedy of delays petitioners alleged that the audit of the tax_year was neither performed adequately nor timely asa result petitioners argued had the audit been completed in a reasonable manner the tax refunds that would have discharged the liability or the lack thereof would have adequately determined the manner in which mr wish could have and would have paid the entire liability including interest as of a matter of fact as soon as the liability was determined mr wish made a substantial payment on the balance of the income_tax_liability respondent found no errors or delays to support an abatement of interest and therefore denied petitioners’ interest abatement claim opinion sec_6404 provides that the commissioner may abate --- - the assessment of interest on any deficiency attributable to any error or delay by an officer_or_employee of the internal_revenue_service irs in performing a ministerial_act or any payment of any_tax described in sec_6212 to the extent that any error or delay in such payment is attributable to such officer_or_employee being erroneous or dilatory in performing a ministerial_act an error or delay is taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer and after the irs has contacted the taxpayer in writing with respect to such deficiency or payment see sec_6404 the treasury has interpreted a ministerial_act as a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer’s case after all prerequisites to the act such as conferences and review by supervisors have taken place ’ see sec_301_6404-2t b temporary proced admin regs fed in sec_6404 was amended under sec_301 of the taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 to permit the commissioner to abate interest with respect to an unreasonable error or delay resulting from managerial and ministerial acts this amendment however applies to interest accruing with respect to deficiencies or payments for tax years beginning after date therefore the amendment is inapplicable to the case at bar see 112_tc_19 n ’ the senate_finance_committee stated that the irs may define a ministerial_act in regulations s rept pincite 1986_3_cb_1 --- - reg date this court may order an abatement where the commissioner’s failure to abate interest was an abuse_of_discretion see sec_6404 in order to prevail the taxpayer must demonstrate that in not abating interest the commissioner exercised his discretion arbitrarily capriciously or without sound basis in fact or law see 112_tc_19 in enacting sec_6404 congress intended for the commissioner to abate interest where failure to abate interest would be widely perceived as grossly unfair h rept pincite 1986_3_cb_1 s rept pincite 1986_3_cb_1 congress however did not intend that abatement be used routinely to avoid payment of interest id petitioners argue that from date to date respondent committed errors or delays while processing their refund claim for ie committed errors or delays in performing ministerial acts petitioners specifically complain the final u s treasury regulations under sec_6404 were issued on date see sec_301_6404-2 proced admin regs fed reg date the final regulations contain the same definition of a ministerial_act as the temporary regulations because the final regulations however incorporate amendments to sec_6404 pursuant to the taxpayer bill of right sec_2 publaw_104_168 110_stat_1452 they are inapplicable here see id pincite2 -- - that their and amended returns were referred for examination on date but examiner kruse delayed the examination until date when he first contacted petitioners petitioners also argue that the period involved in transferring petitioners’ files from examiner kruse’s office to appeals date to date was excessive additionally petitioners claim that between date and date respondent was dilatory in forwarding their files from appeals to agent bose further petitioners argue that from date to date agent bose reaudited the amended returns instead of simply issuing the rar because petitioners intended to apply the anticipated refund as payment for any liabilities outstanding as to the tax_year petitioners claim that the alleged errors or delays in the refund claim for relate to the tax_year accordingly petitioners contend that they are entitled to an abatement of interest under sec_6404 as to the tax_year respondent counters that no errors or delays in performing ministerial acts occurred during the processing of the refund claim for further respondent argues that even if any such errors or delays were committed petitioners cannot be allowed an abatement of interest for the tax_year under sec_6404 e with regard to such errors or delays in other words respondent claims that the errors or delays were not associated with the - processing of the tax_return see sec_301_6404-2t b temporary proced admin regs fed reg date finally respondent argues that the accrual of interest during the period in issue is solely attributable to petitioners’ decision to seek a hold based on the claim_for_refund on collection and not to pay the outstanding tax_liability in the instant case petitioners have not specifically addressed upon which prong of sec_6404 they base their claim in enacting sec_6404 e a congress vested the commissioner with discretion to abate interest on any deficiency attributable in whole or in part to an error or delay committed by an officer_or_employee of the irs in performing ministerial acts for example congress explained that a delay in the issuance of a statutory_notice_of_deficiency after the irs and the taxpayer have completed efforts to resolve the matter could be grounds for abatement of interest s rept pincite supra pincite petitioners have not alleged that respondent committed any errors or delays in determining or assessing petitioners’ tax_deficiency with regard to the tax_year errors or delays in the determination or assessment of a deficiency however do not constitute the sole basis for relief under sec_6404 congress has also provided relief for any errors or delays in the payment of tax to the extent that such errors or delays are attributable to the commissioner being erroneous or dilatory in performing ministerial acts see sec_6404 e b gross v commissioner tcmemo_2000_44 petitioners claim that respondent’s untimely processing of their refund claim for delayed the ultimate payment of their tax_liability it appears that petitioners seek an abatement of interest pursuant to sec_6404 we therefore analyze petitioners’ claim under that provision petitioners assume that the late payment of the outstanding tax_liability for and the associated accrual of interest are attributable within the meaning of sec_6404 e b to the various steps they cite with regard to the processing of the refund claim for we however cannot characterize those steps as the cause of the delay in payment of the outstanding tax_liability for the acts described by petitioners are part of the administrative process of resolving the refund claim for and not a direct part of the payment process for the tax_year a different tax_year the only relation between the refund claim for and the payment of the tax_liability is that created by petitioners in deferring the payment of the tax_liability on the assumption that the refund claim for would be granted we thus do not find the requisite connection between the alleged errors or delays in the procedures employed for processing the refund claim and the accrual of interest that is the subject of petitioners’ interest abatement claim for the tax_year ’ we note that a significant aspect of the delay in the ultimate payment of the tax_liability is attributable to petitioners they chose to await the determination of the refund claim for while all along requesting holds on collection we have considered all of the arguments raised by the parties and to the extent not discussed herein find them to be moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent this is not the case for example in which a claim_for_refund was allowed and after a specific request by the taxpayer to apply the refund to the tax_year in issue the commissioner failed to act on the taxpayer’s request see mankita v commissioner tcmemo_1999_420 in which we rejected a taxpayer’s claim under the facts of that case that an abatement of interest should have been allowed because the commissioner had failed to apply a refund to the tax_year in issue


internal_revenue_service number release date index number 468b --------------------------------- --------------------------- ------------------------------ ------------------------------------------------- -------------------------------------- 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 b06 plr-122932-18 date date legend debtors court plan trust agreement ----------------------------------------------------------------------------------- -------------------------------------------------- ----------------------------------------------------------------------------------- ----------------------- ----------------------- ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- ---------------------------------------------------------------------- -------------------------------------------------------- ------------------------------------------------------- ------------------ liquidating_trust trustee accountants trust’s tax advisors ---------------------------------------------- date date date date year year ------------------ ------------------- --------------------------------------------- ---------------------- ------------------------------------------------------- ------------------------------------------------------- dear --------------------- plr-122932-18 this letter responds to your request dated date and subsequent correspondence requesting a ruling on behalf of the liquidating_trust specifically you requested an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_1_468b-9 of the income_tax regulations for year facts on date the debtors filed voluntary petitions in the court seeking relief under chapter of the bankruptcy code on date the court confirmed the plan including the proposed trust agreement and appointed trustee to serve in the subject capacity under the terms of the plan all of the assets and liabilities of the debtors were transferred to the liquidating_trust for the trustee to administer for the benefit of the holders of various impaired classes of claims and equity interests collectively trust beneficiaries in full satisfaction of those claims the liquidating trustee was to liquidate trust assets and distribute the net_proceeds to the trust beneficiaries after the funding of reserves for the various classes of higher priority claims the intent of the plan and trust agreement was that the liquidating_trust qualify as a grantor_trust and that the liquidating trustee would file tax returns for the liquidating_trust as a grantor_trust pursuant to sec_1_671-4 instead of taxing any reserves established for disputed claims as part of the liquidating_trust the plan and trust agreement also empowered the liquidating trustee to use his discretion to determine the best way to report for tax purposes any reserves including the ability to file an election to treat them as a disputed_ownership_fund dof within the meaning of sec_1_468b-9 because a significant number of claims that were higher in priority to the claims and equity interests held by the trust beneficiaries were disputed and the total amount of disputed claims was in excess of the value of the liquidating trust’s assets the trust’s assets were completely held in reserve pending the trustee’s ongoing process of reconciling and resolving the disputed claims as a result no distribution or other satisfaction has been made on account of the claims held by the trust beneficiaries the trustee engaged the accountants to prepare the year federal_income_tax returns for the liquidating_trust the accountants had previously prepared the debtors’ pre- bankruptcy income_tax returns for the prior tax_year and had experience preparing tax returns for liquidating trusts when preparing the liquidating trust’s year tax returns the accountants advised the trustee that it was necessary to file as a complex_trust because the information necessary to issue information statements to the beneficiaries that was required for the trust to be treated as a grantor_trust was not available plr-122932-18 neither the accountants nor any other adviser informed the trustee that he had the option to file an election to treat any reserve for disputed claims as a dof the trustee concluded that he had no reason to question the accountants’ recommendation and accepted their advice that the trust should file its federal_income_tax return as a complex_trust on date the trust timely filed its federal_income_tax return for year as a complex_trust and did not file any dof election for any portion of the trust the accountants included form_8275 disclosure statement with the year return noting that the trust was unable to file as a grantor_trust and that it was filing as a complex_trust on date the accountants raised the issue with the trustee as to whether the trust could issue information statements to the trust beneficiaries for the upcoming year return for the trust in response the trustee asked the trust’s tax advisors to assist the accountants on the proper preparation of the year tax_return during this process the trust’s tax advisors learned that the trust had filed its year return as a complex_trust and had not made an election to be treated as a dof the trust’s tax advisors advised the trustee that more explicit legal authority is available regarding how the trust should report its taxable_income if it were treated as a dof instead of as a complex_trust the trustee accordingly filed this ruling_request before the due_date for the year tax_return ruling requested trustee requests an extension of time under sec_301_9100-1 and sec_301_9100-3 to file any necessary elections under sec_1_468b-9 to treat the eligible portion of the liquidating_trust as a disputed_ownership_fund effective for year law and analysis sec_468b provides that n othing in any provision of law shall be construed as providing that an escrow account settlement fund or similar fund is not subject_to current income_tax sec_468b authorizes the issuance of regulations providing for the taxation of any such account or fund whether as a grantor_trust or otherwise sec_1_468b-9 regarding disputed ownership funds was issued pursuant to sec_468b sec_1_468b-9 provides that a disputed_ownership_fund means an escrow account trust or fund that i is established to hold money or property subject_to conflicting claims of ownership ii is subject_to the continuing jurisdiction of a court iii requires the approval of the court to pay or distribute money or property to or on behalf of a claimant transferor or transferor-claimant and iv is not a qualified_settlement_fund under sec_1_468b-1 a bankruptcy_estate or part thereof resulting from the plr-122932-18 commencement of a case under title of the united_states_code or a liquidating_trust under sec_301_7701-4 of this chapter except as provided in sec_1_468b-9 under sec_1_468b-9 the trustee of a liquidating_trust established pursuant to a plan confirmed by the court in a case under title of the united_states_code may in the liquidating trust’s first taxable_year elect to treat an escrow account trust or fund that holds assets of the liquidating_trust that are subject_to disputed claims as a disputed_ownership_fund pursuant to this election creditors holding disputed claims are not treated as transferors of the money or property transferred to the disputed_ownership_fund a trustee makes the election by attaching a statement to the timely filed federal_income_tax return of the disputed_ownership_fund for the taxable_year for which the election becomes effective the election statement must include a statement that the trustee will treat the escrow account trust or fund as a disputed_ownership_fund and must include a legend sec_1_468b-9 election at the top of the page the election may be revoked only upon consent of the commissioner by private_letter_ruling sec_301_9100-1 provides that the commissioner has the discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make certain regulatory elections sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or in a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 the requested election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in sec_1_468b-9 trustee’s request is analyzed under the requirements of sec_301_9100-3 because the automatic provisions of sec_301_9100-2 are not applicable requests for relief under sec_301_9100-3 will be granted when a 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 see sec_301_9100-3 sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief before the failure to make the regulatory election is discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the plr-122932-18 service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty was or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences and chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money the section also provides that if the tax consequences of more than one taxpayer are affected by the election the government’s interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made further sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion the information and representations furnished by the trustee have established that the trustee has acted reasonably and in good_faith in filing this request furthermore granting an extension will not prejudice the interests of the government accordingly an extension of time is hereby granted under sec_301_9100-3 for the trustee to file any necessary sec_1_468b-9 election statements for year this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to the election statement when it is filed procedural matters 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 ruling is limited to the timeliness of the filing of any necessary sec_1 468b- c elections this ruling does not relieve the taxpayer from any penalty that it may owe as a result of the failure to timely file its federal_income_tax return s plr-122932-18 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives a copy of this letter must be attached to any federal_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 the letter_ruling the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely roy a hirschhorn branch chief branch office of associate chief_counsel income_tax accounting


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-167495-02 date date x a d1 year dear this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 in year a as the sole shareholder and president of x represents that x was intended to be an s_corporation beginning year its first taxable_year for year x filed a form_1120s u s income_tax return for an s_corporation however no form_2553 election by a small_business_corporation was filed with the internal_revenue_service sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter plr-167495-02 then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely yours matthew lay senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------------------------- ------------------------------------ -------------------- ---------------------------------- ------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------------------------------ ---------------------------------------- telephone number ---------------------- refer reply to cc psi b04 plr-129979-12 date date legend decedent attorney -------------------------------------------- ---------------------- dear --------------------------------------------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to file a form_8939 allocation of increase in basis for property_acquired_from_a_decedent to make the sec_1022 election and to allocate basis provided by sec_1022 of the internal_revenue_code code to eligible_property transferred as a result of decedent’s death the facts and representations submitted are summarized as follows decedent died in the executors of decedent’s estate retained attorney to prepare the necessary tax filings for the estate attorney failed to prepare the form_8939 before the filing deadline of january ---- consequently the executors failed to make a sec_1022 election for decedent’s estate law and analysis sec_1022 provides that property_acquired_from_a_decedent who died after date is treated as transferred by gift and the basis of the person acquiring the property from such a decedent is the lesser_of the adjusted_basis of the decedent or the fair_market_value of the property at the date of the decedent's death sec_1022 provides in general that the basis_of_property under sec_1022 is increased by basis increase that is allocated to the property plr-129979-12 sec_1022 provides in general that basis increase is the portion of the aggregate basis increase that is allocated to the property sec_1022 and c provide that the aggregate basis increase is dollar_figure and that the aggregate basis increase is increased by-- i the sum of the amount of any capital_loss_carryover under sec_1212 and the amount of any net_operating_loss_carryover under sec_172 that would but for the decedent's death be carried from the decedent's last taxable_year to a later taxable_year of the decedent plus ii the sum of the amount of any losses that would have been allowable under sec_165 if the property acquired from the decedent had been sold at fair_market_value immediately before the decedent's death sec_1022 provides that in the case of property that is qualified spousal property the basis of such property under sec_1022 as increased under sec_1022 is increased by spousal property basis increase allocated to the property sec_1022 provides in general that spousal property basis increase is the portion of the aggregate spousal property basis increase which is allocated to the property sec_1022 provides that the aggregate spousal property basis increase is dollar_figure sec_1022 provides in general that the basis_of_property acquired from a decedent may be increased under sec_1022 or c only if the property was owned by the decedent at the time of death sec_1022 describes property that is considered to be owned by the decedent at the time of death sec_1022 provides that the basis adjustments under sec_1022 and c shall not increase the basis of any interest in property above its fair_market_value in the hands of the decedent as of the date of the decedent's death sec_1022 provides in general that the executor is to allocate the basis adjustments under sec_1022 and c on the return required by sec_6018 and that any allocation made may be changed only as provided by the secretary sec_1022 describes property that is considered to be acquired from the decedent for purposes of sec_1022 subtitle a of title v of the economic_growth_and_tax_relief_reconciliation_act_of_2001 p l stat enacted sec_2210 which made chapter the estate_tax inapplicable to the estate of any decedent who died in and chapter the generation skipping transfer gst tax inapplicable to generation-skipping transfers made in on date tax relief unemployment insurance reauthorization and job creation act of truirjca p l stat became law and sec_301 of truirjca retroactively reinstated the estate and plr-129979-12 gst taxes however sec_301 of truirjca allows the executor of the estate of a decedent who died in to elect to apply the code as though sec_301 of truirjca did not apply with respect to chapter and for property acquired or passing from a decedent within the meaning of sec_1014 thus sec_301 of truirjca allows the executor of the estate of a decedent who died in to elect not to have the provisions of chapter apply to the decedent’s estate but rather to have the provisions of sec_1022 apply the sec_1022 election notice_2011_66 2011_35_irb_184 section i a provides that the executor of the estate of a decedent who died in makes the sec_1022 election by filing a form_8939 on or before date notice_2011_76 2011_40_irb_479 extended the due_date of the form_8939 and thus the election from date to date notice_2011_66 section i d provides that the internal_revenue_service will not grant extensions of time to file a form_8939 and will not accept a form_8939 filed after the due_date except in four limited circumstances provided in section i d under this section of notice_2011_66 an executor may apply for relief under sec_301_9100-3 based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore the executors of decedent’s estate are granted an extension of time of days from the date of this letter to make the sec_1022 election on a form_8939 and allocate additional basis to eligible_property as provided by sec_1022 a copy of this letter should be attached to the form_8939 in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 plr-129979-12 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by _________________________ james f hogan chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


internal_revenue_service number release date index number ---------------------- ---------------------------- -------------------------------------------------- -------------------- ------------------------------------------ department of the treasury washington dc person to contact ---------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 - plr-123796-06 date date -------------------------------------------------- x -------------------------------------------------- y -------------------------------------------------- ---------------------------------- -------------------------- --------- ------------ ------------------ ---------------------- -------------------------- z -------------------------------------------------- country country date date date date dear ----- ----------- requesting rulings under sec_301_7701-3 and sec_301_9100-3 of the procedure and administration regulations specifically the service’s consent is requested to change x’s classification from a disregarded_entity to an association_taxable_as_a_corporation effective date on date x represents that x is a foreign_entity eligible to elect to be treated as an association_taxable_as_a_corporation x is a wholly-owned subsidiary of y a country this letter responds to a letter dated date submitted on behalf of x the information submitted states that x was formed under the laws of country -------------------------- plr-123796-06 limited_liability_company z a domestic_corporation acquired y and x through a subsidiary entity on date y had previously made an election on date within sixty months prior to date for x to be treated as a disregarded_entity for federal tax purposes upon z’s acquisition of x it was intended that x would be treated as an association_taxable_as_a_corporation effective date the service’s consent is now requested under sec_301 c iv to change its classification z who owned all of x on date the intended effective date of the proposed classification change had no ownership_interest in x on date due to inadvertence x failed to file a timely form_8832 entity classification election electing to treat x as an association_taxable_as_a_corporation effective date corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code b unless the entity elects otherwise a foreign eligible_entity is-- a a partnership if it has two or more members and at least one member does not have limited_liability or b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that a business_entity that is not classified as a sec_301_7701-3 provides that except as provided in sec_301 sec_301_7701-3 provides that if an eligible_entity makes an election sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed under sec_301_7701-3 to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however the commissioner may permit the entity to change its classification by election within the sixty months if more than fifty percent of the ownership interests in the entity as of the effective date of the subsequent election are owned by persons that did not own any interests in the entity on the filing_date or on the effective date of the entity's prior election extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines sec_301_9100-1 provides that the commissioner may grant a reasonable sec_301_9100-1 through provide the standards the sec_301_9100-3 provides the standards the commissioner will use to sec_301_9100-2 provides the rules governing automatic extensions of time for plr-123796-06 the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin commissioner will use to determine whether to grant an extension of time to make the election making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we consent to x changing its classification for federal tax purposes less than months after its previous classification change as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as an association_taxable_as_a_corporation effective date a copy of this letter should be attached to the form_8832 to be filed with the appropriate service_center within the extension period a copy is enclosed for that purpose federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative except as specifically set forth above no opinion is expressed concerning the sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes