internal_revenue_service number release date index number --------------------------------------- ----------------------------- ------------------------- in re -------------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-120253-11 date november legend settlor trust trust trust trust -------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------------------------------------- ------------------------------------------------------------ -------------------------------- ------------------------- --------------------------- ------------------- child child child company corporation date spouse trustee --------------------------- state state state court ---------------------------------------------------------------------------------------- ----------------------------- -------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- --------- foundation individual individual individual individual ------------------------- ------------------------------------------------------- ---------------------- ------------------------ --------------------- -------------------------- plr-120253-11 dear ----------------- this letter responds to the date letter and subsequent correspondence from your authorized representative requesting gift and generation-skipping_transfer gst tax rulings with respect to the proposed modifications and restatement of trust the facts and representations submitted are summarized as follows on date a date after date settlor established trust an irrevocable_trust to benefit his three children child child and child and their issue trust directed the trustee to establish three separate and equal trusts trust to benefit child and child 1’s issue trust to benefit child and child 2’s issue and trust to benefit child and child 3’s issue the trustee is settlor’s spouse spouse also referred to herein as trustee this letter_ruling pertains to trust when trust was created settlor and spouse resided in state currently settlor and spouse reside in state the corpus of trust consists entirely of intangible investment_assets it is represented that settlor allocated sufficient gst_exemption to trust to cause trust and the trusts created thereunder to have an inclusion_ratio of zero currently trust is administered under the laws of state trustee proposes to petition court for a court order to change the situs of trust to state and to modify trust as follows trust will be modified to change the reference to beneficiary to primary beneficiary and to change the reference to state to state throughout trust article iii contains the distribution and termination provisions article iii provides that if there are no surviving descendants of settlor the trust estate will pass to settlor’s heirs at law under state law the parties represent that state is a scrivener’s error this article will be modified to replace state with the following under the laws of the state in which settlor is domiciled immediately prior to the date of the distribution or his death whichever is earlier article iii also provides that trust and trusts created thereunder will terminate not later than one day less than twenty-one years after the death of the last survivor of settlor and settlor’s issue who are living on the date of execution of trust this provision will be modified by inserting date in place of on the date of execution article iv contains the trustee administration provisions article iv a describes the trustees powers and duties paragraph gives the trustees the power to retain property transferred to the trust including stock in company without liability this provision will be modified to insert corporation for company plr-120253-11 the last sentence of article iv a provides that notwithstanding anything herein to the contrary any power granted to any trustee hereunder shall be limited to the extent necessary to cause such power not to constitute a general_power_of_appointment under sec_2041 of the code the proposed modification adds the following or to cause any trust created hereunder to be treated as a grantor_trust with respect to settlor under the provisions of subchapter_j of the code in addition trustees shall have no liability with respect to any investment in or purchase or sale of interests in any corporation partnership general or limited limited_liability_company or other entity that is controlled directly or indirectly by a group consisting of settlor spouse and or one or more of settlor’s descendants so long as the price is the fair_market_value of the stock partnership_interest membership interest or other_securities the family securities being acquired or sold determined on the basis of either i a qualified independent appraisal or ii a written_agreement between the trust and the purchaser or seller as applicable that provides for adjustment of an agreed purchase_price or quantity of family securities based upon a final agreement with the internal_revenue_service or a final and non-appealable determination of value by a court of appropriate jurisdiction nor shall they have any duty to sell for reasons of diversification or otherwise the family securities article iv b refers to any applicable uniform gift to minors act the proposed modification inserts the words or transfer after the word gift article iv c sets forth what considerations a trustee should consider in exercising his or her discretion in making discretionary distributions to any beneficiary the proposed modification removes a sentence that relieved the trustee from the requirement to seek out any beneficiary for purposes of determining the circumstances of such beneficiary article iv d requires the trustee to provide statements to the beneficiaries regarding the trust accounts the proposed modification eliminates this requirement the proposed modifications will add a new paragraph e to article iv this paragraph allows the trustees to divide a_trust at any time there is more than one primary beneficiary of any trust the trustees are also authorized to divide a_trust at any time when the gst_exemption is allocated to a portion but less than all of the trust in order to create two separate trusts with one resulting trust having an inclusion_ratio of zero and the other resulting trust having an inclusion_ratio of one the proposed modifications will add a new article v which to the extent trust or trusts created thereunder hold shares of an s_corporation governed by sec_1361 et seq of the code gives the trustees authority to make an election under sec_1361 to be plr-120253-11 treated as an electing_small_business_trust and in the absence of such election to administer the trust as a qualified_subchapter_s_trust article v will be renamed article vi this article prohibits a beneficiary from selling transferring or alienating any interest in trust the proposed modification will expressly provide that each trust created under trust is a spendthrift trust article vii contains the successor trustee provisions paragraph b provides that when spouse ceases to be a trustee then individual and individual will serve as co-trustees if individual fails or declines to serve then individual shall serve as a successor co-trustee if individual fails or declines to serve then individual shall serve as a successor co-trustee paragraph c provides that at such time when spouse ceases to serve as a trustee then the beneficiary shall upon attaining the age of twenty-five years become a co-trustee upon attaining the age of thirty years such beneficiary shall serve in place of every co-trustee who is not an independent_trustee in addition at such time as spouse is no longer serving as a trustee any beneficiary who is over the age of thirty may remove or appoint any trustee or co-trustee including such beneficiary provided following such removal and appointment at least one-half of all trustees are independent trustees paragraph d provides that the individual trustee or co-trustees may appoint any corporate trustee to serve with or in place of said individual trustee and may remove any corporate trustee with or without appointment of a successor corporate trustee any corporate trustee may resign at any time upon the appointment of a successor corporate trustee if any removal is by a non-independent trustee or if a successor trustee is not an independent_trustee then the remaining trustees shall appoint such number of independent trustees as necessary to cause at least one-half of all trustees at all times to be independent trustees paragraph g provides that if the office of trustee becomes vacant and is not filled under paragraphs b through f of article vii then the majority of competent adult beneficiaries may act as trustees or any one of the beneficiaries may act as trustee paragraph i defines independent_trustee to mean a trustee who is not a related and subordinate party within the meaning of sec_672 of the code and who is not settlor’s spouse or anyone occupying the following named relations to settlor father mother descendant brother or sister an employee of settlor a corporation or any employee of a corporation in which the stock-holdings of settlor and the trust are significant from the standpoint of voting control or a subordinate employee of a corporation in which settlor is an executive following the death of settlor or at any other time when a determination is being made as to whether a trustee is an independent_trustee with respect to one or more of the then beneficiaries of a_trust plr-120253-11 such determination shall be made by treating the beneficiary as if the beneficiary were settlor of the affected trust on date individual sec_1 and each irrevocably and absolutely disclaimed his right to serve at any time as successor trustee of trust article vii will be renamed article viii and will be modified to reflect these renunciations and provide for alternative successor trustees as follows paragraph b provides that trustee is given the right during her lifetime to remove or appoint any trustee including a corporate trustee provided that trustee may only remove a trustee if at least one-half of the remaining trustees are independent trustees and she may only appoint a trustee who is an independent_trustee paragraph c provides that settlor may never serve as a trustee during settlor’s life settlor has the power to remove and replace any trustee with a person who is an independent_trustee paragraph d provides that after the death or incapacities of settlor and spouse or at such time as trustee ceases to serve as a trustee and no successor trustee appointed by settor or trustee is serving all of settlor’s children who are then living shall automatically become co-trustees of each such trust the trustee who is the child of settlor for whom the trust is named and identified the named child together with any trustees appointed by the named child or who succeed to the named child’s position as trustee shall collectively have two votes with respect to all matters to be decided by the trustees of such trust and each of the other two children of settlor shall have in his or her capacity as a trustee one vote should one of settlor’s children other than the named child not be living fail to qualify or for any other reason cease to serve as a trustee of such trust the total number of votes cast by all trustees shall be reduced to two with one being cast collectively by the named child and his or her appointees and successors in his her or their capacity as trustee s and the remaining vote being cast by the other child of settlor who is serving as trustee upon the death resignations or ceasing to serve of both children of settlor who are not the named child the named child shall serve as sole trustee of such trust the named child may at any time and from time to time name any person to serve in the named child’s place as trustee or to serve as co-trustee with such named child and or remove any person so appointed but all such trustees so appointed by the child shall collectively share the vote or votes allotted to the trustee who is the named child and such appointments shall not increase such vote or votes provided at such time as no child of settlor who is not the named child is serving as trustee of the named child’s trust the named plr-120253-11 child may only appoint or remove the trustees of such trust in a manner which results in at least one-half of the trustees of the trust being independent trustees paragraph e provides that upon the death of any primary beneficiary his or her surviving_spouse shall serve as a co-trustee of any trust of which all succeeding primary beneficiaries or permissible distributees other than such surviving_spouse are under the age of twenty-five years if such surviving_spouse would at any time be the sole trustee of such trust no action shall be taken by the trust until foundation appoints a co-trustee of such trust such co-trustee together with the surviving_spouse will serve as the sole trustees with each trustee having a single vote at such time as any descendant of the named child attains the age of twenty-five years and is a primary beneficiary of a_trust adult descendent such adult descendant shall automatically become a trustee of the trust in the place of the children of the settlor who are then serving as trustees or the trustee appointed by foundation such adult descendant may serve as the sole trustee of such trust a majority of adult descendants who are then serving as the trustee s of the trust may appoint or remove the trustees of such trust in a manner which results in at least one-half of the trustees of the trust being independent trustees a trustee appointed by foundation shall serve as sole trustee in the absence of both the surviving_spouse trustee and an adult descendant trustee any trustee appointed by foundation must be an independent_trustee paragraph f provides that if at any time a trustee is prohibited by this instrument from acting because that trustee is not an independent_trustee such trustee may appoint an independent_trustee to act in his or her place and exercise such vote as the trustee otherwise would have been able to exercise article viii contains miscellaneous provisions paragraph c explains under what circumstances a trustee may be held liable this provision will be renamed article ix and is modified to provide that a corporate trustee may notwithstanding the duties restrictions and liabilities otherwise imposed by state law lend funds to a corporate trustee or an affiliate of the corporate trustee purchase assets from or sell assets to a trustee or an affiliate of the trustee purchase and sell assets between two trusts of which the corporate trustee is the trustee and purchase or sell share securities or other financial instruments of a corporate trustee or affiliate paragraph f provides that the governing law of trust is the law of state this provision is modified to provide that trust will be governed construed and administered according to state law and expressly provides that the trustees may change the situs of trust plr-120253-11 article ix provides that trust is irrevocable and that settlor has no reversionary_interest in trust this article will be renamed article x and is modified by adding the following the independent trustees of any trust created hereunder shall have the power exercisable in their sole discretion to make modifications as are reasonably necessary to ensure that such trust continues to qualify as a gst_exemption trust trustee requests the following rulings the change in situs of trust from state to state will not cause trust to lose its exempt status from gst tax the proposed modifications and restatement of trust will not cause any distribution from or termination of any interests in trust and trusts created thereunder to be subject_to the gst tax the proposed modifications and restatement of trust will not cause any beneficiary of trust to have made a gift_for gift_tax purposes law and analysis ruling sec_1 and sec_2601 of the internal_revenue_code imposes a tax on every gst made after date a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a power or otherwise of an interest in property held in a_trust unless a immediately after such termination a non-skip_person has an interest in such property or b at no time after such termination may a distribution including distributions on termination be made from such trust to a skip_person sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax of an interest in property to a skip_person sec_2631 as in effect for applicable years of the trust provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation which may be allocated by such plr-120253-11 individual or his executor to any property with respect to which such individual is the transferor under sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is defined as the excess if any of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of the gst_exemption allocated to the trust and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip under a of the tax_reform_act_of_1986 act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under paragraph b or of this section hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in this paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes thus unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 sec_26_2601-1 provides that a judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument or to correct a scrivener's error will not cause an exempt trust to become subject_to the provisions of chapter if the judicial action involves a bona_fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph b i a b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the plr-120253-11 modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust sec_26_2601-1 provides that for purposes of this section a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example provides as follows in grantor who was domiciled in state x executed an irrevocable_trust for the benefit of grantor's issue naming a state x bank as trustee under the terms of the trust the trust is to terminate in all events no later than years after the death of the last to die of certain designated individuals living at the time the trust was executed the provisions of the trust do not specify that any particular state law is to govern the administration and construction of the trust in state x the common_law rule_against_perpetuities applies to trusts in a state y bank is named as sole trustee the effect of changing trustees is that the situs of the trust changes to state y and the laws of state y govern the administration and construction of the trust state y law contains no rule_against_perpetuities in this case however in view of the terms of the trust instrument the trust will terminate at the same time before and after the change in situs accordingly the change in situs does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the transfer furthermore the change in situs does not extend the time for vesting of any beneficial_interest in the trust beyond that provided for in the original trust therefore the trust will not be subject_to the provisions of chapter if in this example as a result of the change in situs state y law governed such that the time for vesting was extended beyond the period prescribed under the terms of the original trust instrument the trust would not retain exempt status sec_26_2601-1 example considers the following situation in grantor established an irrevocable_trust for the benefit of grantor's issue naming plr-120253-11 a bank and five other individuals as trustees in the appropriate local court approves a modification of the trust that decreases the number of trustees which results in lower administrative costs the modification pertains to the administration of the trust and does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust will not be subject_to the provisions of chapter no guidance has been issued concerning judicial modifications that may affect the status of trusts that are exempt from gst tax because sufficient gst_exemption was allocated to the trust to result in an inclusion_ratio of zero at a minimum a modification that would not affect the gst status of a grandfathered trust should similarly not affect the exempt status of such a_trust in this case trust provides that state law governs the trust and all trusts created thereunder when settlor executed trust settlor and spouse resided in state currently they reside in state the proposed modification provides that trust will be governed construed and administered according to state law the proposed change in situs and governing law will not change the termination_date of any trust created under trust thus the proposed change in situs will not shift any beneficial_interest in trust and will not extend the time for vesting of any beneficial_interest in trust accordingly based upon the facts submitted and representations made and assuming court issues an order modifying trust as described above we conclude that the change in situs of trust from state to state will not cause trust to lose its exempt status from gst tax the proposed modifications of trust to replace the reference to state to under the laws of the state in which settlor is domiciled immediately prior to the date of the distribution or his death whichever is earlier will correct a scrivener’s error thus under sec_26_2601-1 this modification will not shift a beneficial_interest or extend the time for vesting of any beneficial_interest the other proposed modifications of trust are administrative in nature and under sec_26_2601-1 will not be considered to shift a beneficial_interest to a lower generation in the trust see example of sec_26_2601-1 further as discussed above the proposed modifications will not change the termination_date of trust accordingly based upon the facts submitted and the representations made and assuming court issues an order modifying trust as described above we conclude that the proposed modifications and restatement of trust will not cause trust to be subject_to the gst tax ruling plr-120253-11 sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during the calendar_year by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2512 provides that if the gift is made in property the value thereof at the date of the gift is considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than adequate_and_full_consideration in money_or_money's_worth then the amount by which the value of the property exceeded the value of the consideration is deemed to be a gift and is included in computing the amount of gifts made during the calendar_year in this case the beneficiaries of trust will have the same interest after the proposed modifications that they had prior to the modifications because the beneficial interests of the beneficiaries are substantially the same no transfer of property will be deemed to occur as a result of the modifications accordingly based on the facts submitted and the representations made and assuming court issues an order modifying trust as described above we conclude that the proposed modifications and restatement of trust will not cause any beneficiary of trust to have made a gift_for gift_tax purposes in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives 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 the sec_2601 rulings are based upon a representation that settlor allocated sufficient gst_exemption to trust to cause trust and the trusts created thereunder to have an inclusion_ratio of zero this office has not verified whether trust has sufficient gst_exemption to cause trust and the trusts created thereunder to have an inclusion_ratio of zero the proposed modifications will not cause the inclusion_ratio of trust to change whether the inclusion_ratio is zero or between one and zero however trust will be subject_to gst tax if the inclusion_ratio is not zero further no opinion is expressed or implied concerning the estate_tax consequences of the taxpayers requesting the rulings 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-120253-11 the rulings in this letter pertaining to the federal estate and or generation-skipping_transfer_tax apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely _________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


department of the treasury internal_revenue_service washington d c contact person id number telephone number t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n date date number release date uil e i n legend k m dear -------------- k is requesting a ruling its tax-exempt status under sec_501 of the internal_revenue_code will not be adversely affected if it expends funds to renovate a fraternity house located on its campus facts k is a private liberal arts university exempt under sec_501 of the code and is described in sec_509 and sec_170 k states it has a defined policy of providing safe and proper housing for all its students including those students who belong to fraternities many of the dormitories have been repaired to conform to k’s policy m a fraternity recognized by k owns a house on k’s campus k proposes to renovate m’s fraternity house k states the renovation will be consistent with the repairs k has undertaken on other student residences on campus m’s fraternity house is one of only two residence houses on campus k does not own however k is leasing to m the property on which the house is situated under a ground lease and closely controls m’s house its use and eventual disposition furthermore m is subject_to the same policies standards and regulations that apply to all student housing including other fraternities housed on campus k has a written ground lease agreement with m for a -year term the lease is automatically extended for an additional year but k is not obligated to extend the lease at the end of the term k states this permits it to take possession of the house upon expiration of the 5-year term to use however it sees fit the rental rate is based on a rate per occupant and is substantially comparable to the rental rate k charges other students in comparable residences the lease agreement provides k may inspect m’s house at any time m may not sublet or assign the premises without k’s consent m must use the premises solely for the purpose of operating a chapter house and any improvements require k’s written approval additionally only k students may live in the house and the determination of which and how many students may live in the house is made in a manner consistent with the principles k has established for all student residences k may terminate the lease at any time if m breaches the contract or upon providing one year’s written notice if it has compelling reasons which is defined to include substantial academic needs roadway needs and certain disasters or other occurrences beyond k’s control k states m does not have any equity in the house and will not have any equity as a result of the improvements discussed in this ruling however m has the right to remove any personal_property and certain fixtures that can be removed without causing any structural damage to the house m’s alumni want to donate to k to help pay for m’s fraternity house renovations all funds will be paid directly to k although contributors may earmark their contributions for renovations k states it will honor the designated donations provided it does not restrict or limit k’s full ownership rights under the lease or upon termination of the lease k states it will give donors a receipt that satisfies the conditions of sec_170 of the code and will hold all contributed funds in its general investment account k further states it will exercise control with respect to the size character and design of the renovations which will be consistent with k’s renovation policy and all gifts or donations will be spent on improvements owned only by k ruling requested k’s tax exempt status under sec_501 of the code will not be adversely affected if it expends funds for the renovation of a fraternity house located on campus law sec_501 of the code provides for the exemption from federal_income_tax for nonprofit_organizations organized and operated exclusively for charitable and educational_purposes stated in that section term educational as used in sec_501 relates to the instruction or training of the individual for the purpose of improving or developing his capabilities sec_1 c -l d a of the income_tax regulations provides the providing dormitories and food for students is recognized as one of the universities and colleges’ functions and is incidental to their educational purpose see 307_f2d_357 5th cir revrul_60_367 1960_2_cb_73 holds contributions made to a college to acquire or construct a housing facility for use by a designated fraternity under certain terms and conditions constitutes allowable deductions by donors for federal_income_tax purposes the college described in revrul_60_367 owns the houses and rents the dwellings to fraternity groups on short-term leases at rates closely comparable to the rentals charged by the college for similar housing facilities although donors are permitted to designate a particular fraternity the only practical benefit of the designation is a specific chapter house might be finished ahead of the others the funds are used for improvements on structures owned only by the college revrul_60_367 further states in order for the gift to be deductible it must be in reality a gift to the college and not a gift to the fraternity by using the college as a conduit the college must have the attributes of ownership in respect of the donated property and its rights as an owner must not as a condition of the gift be limited by conditions or restrictions that in effect make a private group the beneficiary of the donated property in addition as an owner the college must be free to use the property acquired with the gift as its future policy suggests or requires analysis k is similar to the organization described in revrul_60_367 k states it has a clearly defined policy of providing safe and proper housing for its students including those students who belong to fraternities because the physical condition of the fraternity house does not measure up to k’s standard m’s alumni want to donate to help renovate m’s fraternity house contributions will be made directly to k and k will give donors a gift receipt that satisfies the conditions of sec_170 of the code k states it regularly accepts contributions from donors designated for construction or renovation of buildings in this case gifts will be similarly designated for renovations and capital improvements to m’s house k has a written ground lease agreement with m for a short term of years at a rental rate closely comparable to the rentals k charges for similar housing facilities the lease is automatically extended for an additional year but k is not obligated to extend the lease at the end of the term k states this permits it to take possession of the house upon expiration of the 5-year term to use however it sees fit the lease agreement provides k may inspect the chapter house m may not sublet or assign the premises without k’s consent m must use the premise solely for the purpose of operating a fraternity house and any improvements require k’s written approval if m breaches any of the contractual provisions k may terminate the lease and assume ownership of the house k states it will control the amount spent on the fraternity house and the character and design of the renovations which is uniformly applied to all residences in need of renovation k states it will accept gifts designated for m’s benefit with the understanding the designation will not restrict or limit k’s full ownership rights or future uses of the donations that k might determine to make in addition only k can use or expend the funds raised for improvements on structures it owns conclusion based on the facts and information submitted k’s tax exempt status under sec_501 of the code will not be adversely affected if it expends funds for the renovation of a fraternity house located on campus pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative this ruling letter does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling letter is directed only to the organizations that requested them sec_6110 of the code provides that they may not be used or cited as precedent please keep a copy of this ruling letter in your permanent records if you have any questions about this ruling please contact the persons whose name and telephone number are shown above in the heading of this letter enclosure notice debra j kawecki manager eo technical technical group sincerely yours


internal_revenue_service number release date index number ------------------------------------------------------------ ----------------- ------------------------------ ------------------------------------ -------------------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------------- id no -------------- telephone number ---------------------- refer reply to cc tege eoeg eo1 plr-132929-17 date date ------------ foundation trust ------------------------------------------------------------------ ------------------------------------------------------------------------------------- --------------------------- ----------------- -------------------------------------------- date land developed land undeveloped land -------------------------------------- a b c d e ----------------------------------------------- ---------------------------------------------------------- --------------------------------- ---------------------------------------------- ------------------------------------------------------------------------------------- --------------------------------------------------------------- ------------------------------------------------------------------------------------- ------------------------------------------------ f dear ------------------------------ this letter responds to a request for a ruling from your authorized representative dated date and subsequent correspondence that certain land is held or used directly in carrying out foundation’s exempt purposes and therefore the value of such property is excluded in computing the minimum_investment_return under sec_4942 of the internal_revenue_code fact sec_1 the internal_revenue_code_of_1986 as amended to which all subsequent section references are made unless otherwise indicated plr-132929-17 foundation is recognized as a tax-exempt_organization described in sec_501 and is classified as a private_operating_foundation within the meaning of sec_4942 foundation was created pursuant to trust and in accordance to its terms acquired on date land land is comprised of developed land and adjoining undeveloped land the developed land consists of a historic residence a visitor and garden center cottages and buildings for administrative offices collections and archives operations grounds security engineered wetlands and storage that are used directly in furtherance of foundation’s exempt purposes the undeveloped land consists of desert property which foundation maintains in its natural state to preserve fragile plant and wildlife ecosystems foundation represents that it is not using undeveloped land for the production_of_income or for investment_trust provides that foundation is organized and shall be operated exclusively for charitable scientific literary or educational_purposes enumerated under sec_170 and at all times shall be operated in accordance with sec_501 in accordance to terms of trust foundation is required to use developed land to carry out certain enumerated exempt educational and charitable permitted programs among the enumerated exempt educational and charitable permitted programs is making developed land available for a and b to -------------------------------------------------------------- ---------------------------------------------------------------------------------and for a c d and e and f to meet ------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------- the other enumerated exempt educational and charitable permitted programs allow for developed land’s use by ----------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------land --- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- foundation does not charge any fees for use of its events space and cottages and allows public access to the visitor and garden center free-of-charge during open hours since ------------------------- such as a and other ------------------- attend programs and events at land providing a safe and secure environment is of paramount importance and a necessity in order for foundation to conduct its educational and charitable activities at the developed land thus foundation hired a leading independent security consulting firm unrelated to it or any disqualified_person with respect to it to evaluate the state of physical security at land to identify concerns vulnerabilities and to recommend security enhancements the security consulting firm prepared a letter and a report recommending the undeveloped land be maintained in its present state because its natural boundaries plr-132929-17 act as a buffer zone enhancing the safety and security at land thereby facilitating the exempt purposes of foundation the letter states that the distance provided by undeveloped land enhances developed land’s security and ----------------------------------- ---------------------- and defend guests and employees of foundation present on developed land in cases where physical biological radiological chemical and human threats may avail themselves the letter concludes that the undeveloped land must be preserved in its present natural state to facilitate the mission of foundation as further explained in the accompanying report foundation’s guests include --------------------------- --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------- facilitating their attendance at events held at land the report states that the buffer zone provided by the undeveloped land enhances protection from ---------------------------------------------------------------------------------- ----------- the report also identifies areas where enhancements to safety and security could be improved most of which foundation plans to implement undeveloped land also serves as an integral part of instructional discussions during weekly garden and bird tours held at developed land foundation educates the public by providing direct educational content with respect to the undeveloped land one of foundation’s education program models is partnering with schools regarding sustainable conservation and science education foundation represents that undeveloped land in its natural state can be used as a study site undeveloped land does not require additional irrigation or maintenance and provides a visual of what the desert looks like in an undeveloped natural state foundation anticipates allowing students to design and carry out projects to collect information about the health of the undeveloped ecosystems in the desert thereby providing free content-driven programs for schools and field experience for students in addition foundation represents that it’s maintenance of undeveloped land in its natural desert state preserves a sustainable native environment that contributes to the health of the community ecosystem parcels of land the size of undeveloped land are very rare the population growth and increased land development in the area continue to push native plant species to the fringes of the desert eliminating their access to the desert floor and impeding their contributions to low desert blow sand ecology undeveloped land also provides habitat for a wide range of desert wildlife that naturally occur travel and hunt in the area ruling requested foundation requests a ruling that the undeveloped land is held or used directly in carrying out its exempt purposes and therefore that its value is excluded in computing its minimum_investment_return under sec_4942 plr-132929-17 law sec_4942 generally imposes an excise_tax on the undistributed_income a private_foundation fails to distribute by the end of the following taxable_year sec_4942 provides that undistributed_income is the amount by which the distributable_amount exceeds the qualifying distributions as defined by sec_4942 made out of such distributable_amount sec_4942 defines distributable_amount as an amount equal to the sum of the minimum_investment_return plus the amounts described in sec_4942 reduced by the sum of the taxes imposed on the private_foundation for the taxable_year under subtitle a and sec_4940 sec_4942 defines the term minimum_investment_return as five percent of the excess of the aggregate of fair_market_value of all assets other than those which are used or held for use directly in carrying out the foundation's exempt purposes over the acquisition_indebtedness determined under sec_514 without regard to the taxable_year in which the indebtedness occurred thus an organization may exclude from its calculation of minimum_investment_return the value of assets which are used or held for use directly in carrying out the organization’s exempt_purpose sec_4942 provides that an operating_foundation is any organization which makes certain qualifying distributions directly for the active_conduct of the activities constituting the purpose or function for which it is organized and operated equal to substantially_all of the lesser_of its adjusted_net_income or minimum_investment_return additionally substantially more than half of its assets must be devoted directly to such activities or to a functionally_related_business or both sec_53_4942_a_-2 states in part that the assets taken into account in determining minimum_investment_return shall not include any assets used or held for use directly in carrying out the foundation’s exempt_purpose sec_53_4942_a_-2 provides that an asset is used or held for use directly in carrying out a foundation's exempt_purpose only if the asset is actually used by the foundation in carrying out the charitable educational or other similar purpose which gives rise to the exempt status of the foundation consequently assets which are held_for_the_production_of_income or for investment for example stocks bonds interest-bearing notes endowment funds or generally leased real_estate are not being used or held for use directly in carrying out the foundation’s exempt_purpose even though the income from such assets is used to carry out such exempt_purpose whether an asset is held_for_the_production_of_income or for investment rather than used or held for use directly by the foundation to carry out its exempt_purpose is a question of fact plr-132929-17 sec_53_4942_a_-2 gives examples of assets which are used or held for use directly in carrying out a foundation’s exempt_purpose these may include real_estate used by the foundation directly in its charitable educational or other similar exempt_activities and any physical facilities used in such activities such as paintings or other works_of_art owned by the foundation which are on public display revrul_75_207 1975_1_cb_361 describes a private_foundation formed to further conservation education and the arts the foundation owns and maintains an island dedicated to preserve the natural ecosystems and historical and archaeological remains on the island that have no residential use and access is limited to invited public and private researchers the ruling holds that the island is being used directly to carry out the foundation’s exempt_purpose in the manner indicated in the regulations under sec_4942 accordingly the foundation may exclude the value of the island in computing its minimum_investment_return under sec_4942 revrul_76_204 1976_1_cb_152 describes an organization formed by scientists conservationists and other community representatives for the purpose of preserving the environment it accomplished this purpose by acquiring and maintaining or transferring to a governmental agency ecologically significant undeveloped land such as swamps marshes forests wilderness tracts and other natural areas generally public access to such land is limited so that the delicate balance of the ecosystem remains undisturbed in these situations the organization will allow educational and scientific research or study as long as such use will not disrupt the particular ecosystem the ruling concludes that the organization is enhancing the accomplishment of an express national policy of conserving the nation’s unique natural_resources and in this sense is advancing education and science and benefiting the public in a manner that the law regards as charitable furthermore the restrictions on current access to the lands maintained by the organization are essential to the preservation of their natural state and are therefore essential to the fulfillment of the organization’s charitable purpose analysis as permitted under sec_4942 and sec_53_4942_a_-2 when computing a foundation’s minimum_investment_return the fair_market_value of assets used or held for use directly in carrying out the foundation’s exempt purposes are excluded sec_53_4942_a_-2 further clarifies that the asset must actually be used by the foundation in carrying out the charitable educational or other similar purpose which gives rise to its exempt status and cannot be held_for_the_production_of_income or for investment preserving the undeveloped land in its natural state is essential to the fulfillment of the charitable scientific and educational exempt purposes of foundation and it is not being held_for_the_production_of_income or for investment but only to further the exempt plr-132929-17 purposes of foundation maintaining the undeveloped land in its natural state enhances security for the exempt permitted programs occurring on developed land in particular as recommended by an independent security consulting firm undeveloped land serves as an important buffer zone which enhances land’s security as well as the ability of ----------------------------------- to protect and defend foundation’s guests in cases where physical biological radiological chemical and human threats avail themselves given the -------------- nature of the events and guests that foundation hosts on the developed land this buffer is essential to foundation’s ability to further the exempt charitable and educational permitted programs enumerated in the trust in addition foundation includes discussions about undeveloped land and its conservation efforts when providing weekly garden and bird tours at developed land and has education program models where it partners with schools on sustainable conservation and science education undeveloped land in its natural state provides a study site for schools conducting conservation education finally preservation of undeveloped land in its natural desert state also serves conservation purposes within the meaning of sec_501 preservation of undeveloped land contributes to sustainable conservation that improves the health of the community ecosystem like the organization described in revrul_76_204 1976_1_cb_361 and therefore furthers charitable conservation_purpose like the organization described in revrul_75_207 1975_1_cb_361 foundation is directly using undeveloped land in carrying out its exempt purposes in the manner required under sec_4942 and sec_53_4942_a_-2 for these reasons undeveloped land is being used in directly carrying out foundation’s exempt purposes within the meaning of sec_53 a - c i and its fair_market_value should not be taken into account in determining minimum_investment_return conclusion based solely on the facts and representations submitted we rule that foundation may exclude the value of undeveloped land in computing its minimum_investment_return under sec_4942 because it is used or held for use directly in carrying out its exempt purposes the ruling contained in this letter is based upon information and representations submitted by foundation and accompanied by a penalty of perjury statement executed by an appropriate party as specified in revproc_2018_1 2018_1_irb_1 this office has not verified any of the material submitted in support of the request_for_ruling and such material is subject_to verification on examination the associate office will revoke or modify a letter_ruling and apply the revocation retroactively if there has plr-132929-17 been a misstatement or omission of controlling facts the facts at the time of the transaction are materially different from the controlling facts on which the ruling was based or in the case of a transaction involving a continuing action or series of actions the controlling facts change during the course of the transaction see revproc_2018_1 sec_11 no ruling is granted as to whether foundation qualifies as an organization described in sec_501 or sec_509 or whether foundation is or continues to be an operating_foundation described in sec_4942 except as expressly provided above no opinion is expressed or implied concerning the federal_income_tax consequences of any aspects of any transaction or item_of_income described in this letter_ruling this letter is directed only to foundation sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to each of foundation’s authorized representatives if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter sincerely mary jo salins chief exempt_organizations branch tege associate chief_counsel cc


t c memo united_states tax_court jeffrey m young petitioner v commissioner of internal revenue respondent docket no 1193-02l filed date jeffrey m young pro_se jeffrey c venzie for respondent memorandum opinion ruwe judge this matter is before us on respondent’s motion for summary_judgment under rule 121' and to impose a penalty under sec_6673 respondent argues that no genuine issue exists as to any material fact and that his determination ‘a111 rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended - to maintain a notice_of_federal_tax_lien filed under sec_6323 should be sustained at the time of filing the petition petitioner resided in scranton pennsylvania summary_judgment is designed to expedite litigation and to avoid unnecessary and expensive trials 61_tc_861 a motion for summary_judgment is granted where the pleadings and other materials show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir the burden is on the moving party to demonstrate that no genuine issue as to any material fact remains and that he is entitled to judgment as a matter of law 116_tc_73 in all cases the evidence is viewed in the light most favorable to the nonmoving party 100_tc_32 however the nonmoving party is reguired to go beyond the pleadings and by his own affidavits or by the ‘depositions answers to interrogatories and admissions on file ’ designate ‘specific facts showing that there is a genuine issue for trial ’ 477_us_317 see also 119_tc_157 115_tc_554 petitioner has not filed a response to respondent’s motion as required by our order of date petitioner filed federal_income_tax returns for and those returns reported taxes due however petitioner did not pay the entire amount of the taxes shown on his returns respondent assessed the taxes reported and also assessed additions to tax and interest on date respondent issued to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 the lien filing was made with respect to unpaid taxes stated as follows type of tax period amount dollar_figure dollar_figure dollar_figure dollar_figure petitioner filed a form regquest for a collection_due_process_hearing with respect to the lien filing an attachment to that form states in pertinent part summarizing i am requesting a due process hearing as outlined form sic i am challenging the appropriateness of the collection action as specified in c a since the irs denied all of my requests of the initial examinations and interviews as provided in publication sec_1 in addition no lien for taxes pursuant to code sec_6321 and sec_6322 is possible because no valid underlying respondent filed a form y c notice_of_federal_tax_lien with the prothonotary of lackawanna county scranton pennsylvania - - assessment was ever made in addition i never received a statutory notice_and_demand for payment of the taxes at issue as required by code sec_6203 sec_6321 and sec_6331 if the appeals officer is going to claim that a particular document sent to me by the trs was a notice_and_demand for payment then i am requesting that he also provide me with a t d or treasury regulation which identifies that specific document as being the official statutory notice_and_demand for payment in addition i am challenging the existence of the underlying tax_liability as i am authorized to do in code sec_6330 b in addition i did not receive a valid notice_of_deficiency in connection with any of the years at issue i am also requesting that the appeals officer have at the due process hearing a copy of the summary record of assessment form c together with the pertinent parts of the assessment which set forth the name of the taxpayer the date of the assessment the character of the liability assessed the taxable_period and the amount assessed as provided for in sec_301_6203-1 in addition i want to see proof that a purported deficiency_notice was actually sent to me also since sec_6330 requires that the appeals officer shall at the hearing obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met i am requesting that the appeals officer have such verification with him at the appeals_conference however if the verification called for by c is signed by someone other then sic the secretary himself than -- in line with the supreme court’s holding in federal crop ins corp vs merril 92l eddollar_figure - i am requesting that the appeals officer also have a delegation_order from the secretary delegating to that the sic person the authority to prepare such a verification petitioner also submitted a supplement to the form request in which he requested that the appeals officer have the following documents at the appeals hearing verification from the secretary proof that a notice_and_demand for payment was sent to petitioner a copy of the actual notice_and_demand that was sent or a blank copy of the notice and a treasury_decision or treasury regulation which identifies that notice as the statutory notice_and_demand in addition petitioner raised challenges to the existence of his underlying tax_liabilities claiming that no liability for income taxes exists as a matter of law further petitioner claimed that there is no statute requiring him to pay income taxes a hearing was held on date in that proceeding petitioner did not raise any collection alternatives or other relevant issues instead petitioner insisted that he did not receive a statutory notice_and_demand for payment petitioner also argued there is no statutory liability in connection with these taxes at issue nor is there a provision that states that i have to pay the taxes at issue and in my letter i said that if the appeals officer believes otherwise he need only identify the code section that establishes such a liability and payment for taxes and i would immediately make arrangements to pay as provided in code sec_6330 sic for whatever the amount the appeals officer claims is due frank smigiel mr smigiel accompanied petitioner to the appeals hearing the appeals officer did not permit mr smigiel to spetitioner stated that he was not disputing the amount of his underlying tax_liabilities attached to the petition is a document that petitioner claims to be a transcription of the appeals hearing -- - represent petitioner at the appeals hearing since he was not an attorney in good standing a certified_public_accountant or an enrolled_agent in good standing the appeals officer allowed mr smigiel to stay at the hearing as a witness only the appeals officer verified that all applicable laws and administrative procedures had been met in doing so he reviewed the information in the case file petitioner’s form the tax correspondence and the case history the appeals officer reviewed the transcripts for and and determined that the proper taxes were assessed they remained unpaid and demand for payment had been made on date the internal_revenue_service irs office of appeals issued a notice_of_determination sustaining the notice_of_federal_tax_lien filing the notice_of_determination states in relevant part as follows relevant issues presented by the taxpayer you do not believe that the filing of notice_of_federal_tax_lien is appropriate you were presented with copies of certified transcripts but failed to show why the lien should be withdrawn or offer alternatives to this action you engaged in repeated requests for documents that were irrelevant unnecessary or for purposes of delay you were given the opportunity to resolve the liabilities or suggest alternatives but chose not to you also objected that mr frank smigiel was not allowed to represent you mr smigiel cannot represent you before appeals per cir and revproc_81_38 to represent you before appeals he must be an attorney certified_public_accountant or an enrolled_agent mr smigiel has none of these qualifications in addition during the period of the appeal you have incurred another liability and have failed to pay estimated_taxes as required_by_law you have a long history of noncompliance and the appeal appears primarily for delay this appeal is limited to the filed notice_of_federal_tax_lien ill balancing efficient collection and intrusiveness further delay would only result in increasing the liabilities as you have done during the appeal you are not eligible for an installment_agreement or an offer_in_compromise due to your lack of compliance although you have had opportunities to comply you have failed to do so therefore it 1s recommended that the actions by the compliance sic be sustained as appropriate after considering all of the facts circumstances and law the filed notice_of_federal_tax_lien shall remain in full force and effect petitioner timely filed a petition with the tax_court in which he alleged as error he did not receive the statutory notice_and_demand for payment the appeals officer did not obtain and produce the verification from the secretary as provided in sec_6330 the appeals officer refused to address challenges to the existence of petitioner’s underlying tax_liability the appeals officer refused to allow mr smigiel to represent petitioner at the appeals hearing and the notice_of_determination is invalid because the appeals officer ended the hearing abruptly and did not allow petitioner to raise any issues as provided for in the law petitioner --- - states in his petition that he is not challenging the assessment on date respondent filed a motion for summary_judgment and to impose a penalty under sec_6673 on date we ordered petitioner to file a response to that motion on or before date petitioner has not fileda response to respondent’s motion as reguired by our order of date after reviewing the pleadings and the materials in the record we find that no genuine issue of material fact exists and that respondent’s determination should be sustained as a matter of law under sec_6330 b a taxpayer may raise challenges to the existence or amount of his underlying tax_liability if he did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the tax_liability petitioner has not raised any legitimate issues regarding his underlying tax_liabilities in his request for an appeals hearing in his supplement to that request in the course of the appeals_office proceedings and in his petition filed with this court instead petitioner challenges the existence of his underlying tax_liabilities on the basis that no internal_revenue_code section we avoid herein whether the self-reporting of taxes ona return constitutes an opportunity to dispute those taxes for purposes of sec_6330 b see horn v commissioner tcmemo_2002_207 --- - makes him liable for income taxes or requires him to pay income taxes we have consistently rejected this type of frivolous tax-protester argument and we perceive no reason nor are we required to address such contentions see eg 737_f2d_1417 5th cir keene v commissioner tcmemo_2002_277 hall v commissioner tcmemo_2002_267 we address petitioner’s remaining contentions to determine whether the appeals officer abused his discretion see 117_tc_117 sec_6330 requires the appeals officer to verify that the requirements of any applicable law or administrative procedure have been met however sec_6330 does not require the appeals officer to rely on a particular document to satisfy his verification function kugqlin v commissioner tcmemo_2002_51 further that section does not require the appeals officer to provide a copy of the verification that the requirements of any applicable law or administrative procedure have been met 118_tc_162 in the instant case the appeals officer reviewed transcripts of petitioner’s account for and as well as other relevant items in the case file the appeals officer verified that all applicable laws and administrative procedures had been met and that petitioner received notice_and_demand for payment for the unpaid tax -- - liabilities at issue copies of the certified transcripts were provided to petitioner petitioner does not challenge the validity of the assessments of taxes further our review of the form_4340 certificate of assessments payments and other specified matters shows that the assessments were valid we perceive no irregularities in the assessment procedures the form_4340 also indicates that multiple notices of balance due as well as the notice_of_intent_to_levy were sent to petitioner for each of the tax years at issue those notices satisfy the requirements of sec_6303 tornichio v commissioner tcmemo_2002_291 ’ the appeals officer did not abuse his discretion in refusing to allow mr smigiel to represent petitioner at the appeals hearing the appeals officer determined that mr smigiel was not an attorney in good standing a certified_public_accountant or an enrolled tax_return_preparer in good standing accordingly ‘a form_4340 certificate of assessments payments and other specified matters provides at least presumptive evidence that the taxes were validly assessed 117_tc_117 the form_4340 herein contains all the information prescribed in sec_301_6203-1 proced admin regs including identification of the taxpayer the character of the liabilities assessed the taxable periods and the amounts of the assessments ‘petitioner suggests that a form_17 or form 17a is the only document that satisfies sec_6303 seemingly relying upon a treasury_decision we have previously rejected this argument keene v commissioner tcmemo_2002_277 davich v commissioner tcmemo_2002_255 tapio v commissioner tcmemo_2002_141 under treasury_department circular no current version pincite c f_r secs and and revproc_81_38 1981_2_cb_592 mr smigiel was not permitted to represent petitioner before the irs appeals_office finally the notice_of_determination herein is valid on its face it is not invalid by reason of the appeals officer’s concluding the appeals hearing abruptly moreover the appeals officer did not terminate the hearing abruptly as petitioner contends the appeals officer gave petitioner ample opportunity to raise relevant issues relating to the notice_of_federal_tax_lien filing however petitioner insisted upon making frivolous and groundless arguments only after petitioner continued to repeat those same arguments and after he failed to raise any relevant issues did the appeals officer end the hearing the appeals officer did not abuse his discretion in doing so sec_6673 authorizes the tax_court to require a taxpayer to pay to the united_states a penalty whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer’s position in the proceeding is frivolous or groundless throughout the proceedings in this case petitioner has raised the same arguments that we have previously and consistently rejected as frivolous and groundless petitioner failed to file a response to respondent’s motion for summary_judgment as required by our order of date petitioner has failed to present any legitimate arguments regarding the collection action at issue and the only reason we find for his instituting and maintaining these proceedings is delay accordingly we impose a penalty of dollar_figure an appropriate order and decision will be entered for respondent


t c memo united_states tax_court mark e schroeder petitioner v commissioner of internal revenue respondent docket no filed date mark e schroeder pro_se rick v hosler for respondent memorandum findings_of_fact and opinion colvin judge respondent determined deficiencies in petitioner's federal income taxes of dollar_figure for dollar_figure for dollar_figure for and dollar_figure for and additions to tax of dollar_figure for dollar_figure for dollar_figure for and dollar_figure for under sec_665l1 a for failure_to_file a timely income_tax return respondent concedes that petitioner overpaid federal income taxes for and and that he is not liable for additions to tax under sec_6651 for and after concessions the issues for decision are whether petitioner's refunds of overpayments for and are barred by the statute_of_limitations under sec_6511 we hold that sec_6511 bars petitioner's refunds for and but that petitioner is eligible for a refund of his overpayment whether petitioner is entitled to receive refunds of his overpayments for or under the doctrine_of equitable_recoupment we hold he is not whether respondent's levy on petitioner's individual_retirement_account in in the amount of dollar_figure was a taxable_distribution we hold that it was section references are to the internal_revenue_code in effect for the years in issue rule references are to the tax_court rules_of_practice and procedure i findings_of_fact some of the facts have been stipulated and are so found a petitioner petitioner lived in arizona when he filed his petition in this case -3- petitioner worked for fairchild data corp fairchild for about years fairchild withheld from petitioner's wages federal income taxes of dollar_figure for dollar_figure for and dollar_figure for in date fairchild laid off petitioner fairchild paid petitioner dollar_figure in of which dollar_figure was withheld for federal income taxes about dollar_figure of the dollar_figure was severance_pay in petitioner had an individual_retirement_account ira at mellon bank n a trustee for fairchild industries inc sometime in respondent served mellon bank or fairchild with a notice_of_levy against the account and mellon bank distributed dollar_figure from the account to respondent of this amount dollar_figure was withheld for federal income taxes mellon bank reported to respondent that it had made a dollar_figure taxable_distribution from petitioner's ira in b petitioner's federal_income_tax returns for and the notices of deficiency petitioner did not file federal_income_tax returns form sec_1040 for and fairchild reported on an information_return sent to respondent that it had paid petitioner taxable wages of dollar_figure in on date respondent sent two notices of deficiency to petitioner one for and and one for respondent determined that petitioner's filing_status was single and allowed petitioner one exemption at a time not specified in the record respondent conceded that petitioner was married and entitled to use joint tax_rates for the years at issue and that petitioner had four dependent_children and was entitled to claim four exemptions for them petitioner had deficiencies in income taxes of dollar_figure for dollar_figure for dollar_figure for and dollar_figure for these deficiency amounts do not take into account prepayment_credits of dollar_figure for dollar_figure for dollar_figure for and dollar_figure for petitioner made no income_tax payments for or after he received the notices of deficiency il opinion a whether petitioner is entitled to receive refunds for overpayment of taxes for and the tax_court has jurisdiction to award to a taxpayer a refund of overpaid taxes if the commissioner issued the notice_of_deficiency within the later of years after the tax was paid or years after the return was filed see sec_6511 a and b b b 516_us_235 the 2-year period applies and the 3-year period does not if the taxpayer did not file his or her income_tax return before the commissioner issued a notice_of_deficiency for that year see sec_6511 b b commissioner v lundy supra pincite petitioner did not file returns for the - years at issue thus we may award a refund of tax only for those amounts paid within the years preceding the date respondent issued the notices of deficiency respondent mailed the notices of deficiency on date we may order a refund of any overpayments petitioner made within the years preceding date petitioner's payments of taxes for and were made by fairchild through withholding withheld income taxes are deemed paid on april of the year following the taxable_year see sec_6513 thus petitioner is deemed to have paid income_tax for on date for on date and for on date all of which dates are more than years before date thus we lack jurisdiction to order a refund of petitioner's overpayments for those years commissioner v lundy supra pincite however petitioner paid or is deemed to have paid income_tax for on date which payment is less than years before date petitioner is entitled to receive a refund of his overpayment_of_tax for b whether equitable_recoupment applies petitioner relies on 329_us_296 and 295_us_247 for the proposition that equitable_recoupment -6- entitles petitioner to a refund of the excess withholding for and we disagree equitable_recoupment does not apply here a claim of equitable_recoupment will lie only where the government has taxed a single transaction item or taxable_event under two inconsistent theories 494_us_596 n citing rothensies v electric storage battery co supra here respondent has not used inconsistent theories of taxation thus equitable_recoupment does not apply cc whether petitioner is taxable on the ira distribution a distribution from an ira is generally includable in income by the recipient in the year in which the distribution is received see sec_408 98_tc_283 a distribution was made to respondent from petitioner's ira in petitioner contends that he is not taxable on the distribution because he did not receive the funds or benefit therefrom and because the distribution was involuntary petitioner also contends that respondent improperly levied his ira because respondent caused the distribution from the account to be a lump-sum_distribution and not a monthly annuity_payment we disagree a taxpayer constructively receives an ira distribution when his or her account is levied and is taxed on it even though the funds are paid to a third party see 89_tc_287 vorwald v commissioner tcmemo_1997_15 once the commissioner issues the notice_of_levy the commissioner steps into the shoes of the taxpayer and acquires 'whatever' rights to the property the taxpayer had 860_f2d_365 10th cir quoting 472_us_713 we sustain respondent's determination that petitioner constructively received and must include in income the dollar_figure distribution from his ira in to reflect concessions and the foregoing decision will be entered under rule


number release date id office uilc cca_2011041808310437 ---------- from ------------------- sent monday date am to ----------------- cc ----------- subject re tefra question there is no requirement to redo the audit and sec_7605 generally prohibits a second_examination in any event the only limitation is sec_6223 which requires the nbap to be issued at least days before the fpaa is issued so the fpaa can be issued in june


t c memo united_states tax_court john e and sandra l west petitioners v commissioner of internal revenue respondent docket no 5376-06l filed date stephen l christian for petitioners spencer t stowe for respondent memorandum opinion swift judge under sec_6330 petitioners challenge respondent’s notice_of_determination sustaining respondent’s levy notice unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure the primary issue for decision is whether respondent’s appeals_office abused its discretion in sustaining a notice_of_intent_to_levy relating to petitioners’ outstanding federal income taxes background the facts of this case have been submitted fully stipulated under rule and are so found at the time the petition was filed petitioners resided in orange county california petitioners have a history of failing to timely pay estimated federal income taxes due and failing to timely file their federal_income_tax returns on date petitioners and respondent agreed on an offer-in-compromise oic on the grounds of doubt as to collectibility relating to approximately dollar_figure in petitioners’ unpaid federal income taxes among other things respondent’s acceptance of petitioners’ oic was contingent on petitioners’ paying within days of respondent’s acceptance of the oic to respondent dollar_figure oic amount timely filing federal_income_tax returns that became due during the 5-year period subsequent to their entering into the because of a credit offset petitioners’ outstanding federal_income_tax liability for including interest penalties additions to tax and interest has been paid in full and any issue herein relating to is now moot oic or until the oic amount was paid in full whichever was longer 5-year compliance_period and timely paying the taxes reported due on their federal_income_tax returns filed during the 5-year compliance_period specifically paragraph d on petitioners’ form_656 offer_in_compromise stated i we will comply with all provisions of the internal_revenue_code relating to filing my our returns and paying my our required taxes for years from the date the irs accepts the offer under the express terms of the oic if petitioners failed to meet any of the express conditions of the oic respondent had the right to revoke the oic and to attempt to collect from petitioners the full amount of petitioners’ unpaid federal income taxes on date petitioners paid to respondent the dollar_figure oic amount petitioners’ 5-year compliance_period thus began when respondent accepted the oic on date during the 5-year compliance_period petitioners among other things failed to pay estimated_taxes failed to timely file their tax returns and or failed to timely pay taxes reported due on their filed federal_income_tax returns as follows year petitioners failed to timely file their return timely pay the tax_liability stated on the return timely pay estimated_taxes timely pay the tax_liability stated on the return timely pay the tax_liability stated on the return timely file their return timely pay the tax_liability stated on the return timely pay estimated_taxes timely pay the tax_liability stated on the return in date petitioners moved to a new address but petitioners did not notify respondent of their change_of address before this move petitioners filed with respondent irs form_2848 power_of_attorney and declaration of representative in which petitioners directed respondent to send to petitioners’ representative copies of any correspondence sent to petitioners petitioners’ and federal_income_tax returns filed with respondent continued to show petitioners’ old address and did not show the new address to which petitioners moved in date petitioners did not otherwise notify respondent of their new address until sometime after date from date through date respondent sent to petitioners at the old address shown on petitioners’ and federal_income_tax returns namely via chirpia mission viejo ca at least seven notices relating to various late filing and late payment additions to tax and penalties that respondent had assessed against petitioners relating to petitioners’ and federal_income_tax returns and warning petitioners of the potential for default on the oic that had been entered into if petitioners did not pay the various additions to tax and penalties that had been assessed against them specifically in date respondent mailed to petitioners at their via chirpia mission viejo address a notice alerting petitioners that the oic was subject_to likely termination if petitioners’ outstanding additions to tax and penalties for and were not paid in date respondent mailed to petitioners at the via chirpia mission viejo address a notice of default on the oic informing petitioners that the oic was terminated on date respondent mailed to petitioners a notice_of_intent_to_levy and a notice of petitioners’ right to a hearing relating to the approximate dollar_figure balance of petitioners’ unpaid federal income taxes on date petitioners filed a form request for a collection_due_process_hearing with regard to respondent’s notice_of_intent_to_levy in which petitioners requested that respondent reinstate the oic on date an appeals_office hearing was held by telephone conference among respondent’s appeals_office petitioners and petitioners’ attorney on date respondent’s appeals_office issued to petitioners a notice_of_determination sustaining respondent’s levy notice in the notice_of_determination respondent’s appeals_office indicated that because petitioners had defaulted on the oic and because petitioners had not provided any financial or other information applicable to other collection alternatives respondent’s levy notice was sustained discussion because the underlying tax_liability is not in dispute we review the actions of respondent’s appeals_office for abuse_of_discretion see 114_tc_176 abuse_of_discretion occurs where the actions of the commissioner’s appeals_office are arbitrary or capricious lack sound basis in law or are not justifiable in light of the facts and circumstances 112_tc_19 pursuant to sec_6330 respondent’s appeals_office must verify that the requirements of applicable law and administrative procedure have been met consider issues raised by petitioners and consider whether the proposed collection action balances the need for the efficient collection_of_taxes with petitioners’ legitimate concern that respondent’s collection be no more intrusive than necessary in reviewing whether respondent’s appeals_office abused its discretion in sustaining respondent’s notice_of_intent_to_levy our analysis is governed by general principles of contract law see 122_tc_133 under the material breach of contract analysis applied in 123_tc_85 revd 439_f3d_455 8th cir if petitioners’ breach is material and sufficiently serious respondent’s obligation to perform may be discharged not so however if petitioners’ breach is comparatively minor on appeal the court_of_appeals for the eighth circuit noted that the failure to comply with an express condition of an oic is itself grounds for the commissioner to revoke the oic regardless of materiality robinette v commissioner f 3d pincite generally for purposes of sec_6330 a notice mailed to the taxpayer’s last_known_address is proper and sufficient 763_f2d_89 2d cir buffano v commissioner tcmemo_2007_32 in determining petitioners’ last_known_address unless otherwise notified respondent may rely upon petitioners’ most recently filed return see 91_tc_1019 78_tc_215 petitioners argue that petitioners’ failure timely to file tax returns to pay estimated_taxes and to pay the various additions to tax and penalties assessed against them during the 5-year compliance_period did not constitute a material breach of the oic and did not justify respondent’s revocation of the oic and therefore that respondent’s appeals_office abused its discretion in sustaining respondent’s notice_of_intent_to_levy we disagree the numerous instances of petitioners’ failure to keep their tax obligations current during the 5-year compliance_period constitute under any standard a significant and material breach of the requirements of the oic we need not address different standards that in other cases might be considered and that might be applicable see ng v commissioner tcmemo_2007_8 respondent mailed to petitioners a number of notices alerting petitioners to the potential for default on the oic and giving petitioners opportunity to bring current their tax and other_payments due although petitioners moved to a new address petitioners failed to apprise respondent of their new address and respondent cannot now be faulted for mailing the notices to the address shown on petitioners’ tax returns petitioners not respondent must bear the consequences of petitioners’ failure to properly file their tax returns with or otherwise apprise respondent of petitioners’ new address petitioners argue that respondent should have but did not mail to petitioners’ representative a copy of the various dunning letters failure of respondent to mail to petitioners’ representative a copy of a notice that was mailed to petitioners provides no basis to reject respondent’s collection action in this case see amsler v commissioner tcmemo_1993_114 notice generally will be valid even when a copy is not mailed to a taxpayer’s representative so long as properly mailed to the taxpayer foster v commissioner tcmemo_1982_115 citing 48_tc_656 because of petitioners’ repeated violations of the conditions of the oic respondent’s appeals_office did not abuse its discretion in sustaining the notice_of_intent_to_levy other arguments petitioners make herein have been considered and rejected to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division apr uniform issue list seit el fa itb legend company a u company b ira t ira u ira v ira w ira x ira y ira z amount f amount e amount g page dear this is in response to your request received in the internal_revenue_service on date for a ruling to waive the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ your have submitted the following facts and representations on date jyou requested that funds in iras v w x y and z be transferred to ira t and ira u with company b you requested that company a liquidate your ira funds prior to their transfer to a new ira at company b amount g was to be transferred to ira t and ira u at company b with the funds distributed from iras v and w contributed to ira t and the funds from iras x y and z contributed to ira u you used a standard account transfer form issued by company b to effectuate the transfer however company a processed the transfer as a taxable_distribution and erroneously withheld amount f to the respective iras thus only amount g was transferred to company b asa contribution to the iras onj date your representative notified company a of the error and requested that it be corrected however when you received your form 1099-rs for each ira for'2003 you noticed that the error was not corrected in federal_income_tax and such amount was not contributed the form 1099-rs indicated that no amount was taxable yet company a withheld tax from all the distributions documentation submitted as part of this request confirms your intent to complete a direct trustee-to-trustee transfer of amount e into an ira with company b based on the facts and representations you request that the internal_revenue_service waive the day rollover requirement with respect to your contribution of amount f into an ira because the failure to waive such requirement would be against equity or good conscience with respect to your ruling_request sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual page receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the issue presented in this case is whether you may properly roll over amount e into iras we note that you had the intent to transfer all amounts standing in iras v w x y and z totaling amount e into iras t and u because of an error on the part of company a company a withheld amount f for federal income taxes and only amount g was transferred however the facts indicate that you had the intent to transfer amount e furthermore amount g had been placed into ira t and ira u and the difference between amount g and amount e amount f would also have been placed in ira t and ira u but for an error on the part of company a which was beyond your control page accordingly pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount f provided all other requirements of sec_408 of the code except the 60-day requirement were met with respect to such distribution the amount to be deposited into ira t and ira u will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent lf you wish to inquire about this ruling please contact at _ please address all correspondence to se t ep ra t3 kekekererrererarer id waa ahhh sincerely yours frances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose