internal_revenue_service number release date index numbers ----------------- ------------------------------------------ ---------------------------------------- ------------------------------------------ ------------------------------------- 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 b03 plr-136482-06 date date ------------ --------------------------- -------------------------------------------- legend x -------------------------------------------------- state date dear ---------------- correspondence written on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to elect to be classified as an association_taxable_as_a_corporation under sec_301_7701-3 the laws of state on date x intended to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date however due to inadvertence form_8832 entity classification election was not timely filed this letter responds to a letter dated date and subsequent the information submitted states that x was organized as a business_trust under facts plr-136482-06 recognized for federal tax purposes that is not properly characterized as a_trust under sec_301_7701-4 sec_301_7701-2 provides that the term business_entity is any entity law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a domestic eligible_entity is a partnership if it has two or more members or disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be sec_301_7701-3 provides that an election made under classified other than as provided in sec_301_7701-3 by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register making certain elections determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-2 provides the rules governing automatic extensions of time for section sets forth the standards the commissioner will use to plr-136482-06 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the this ruling is directed only to the taxpayer requesting it sec_6110 federal tax consequences of the facts described above under any other provision of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative enclosures william p o’shea associate chief_counsel passthroughs special industries sincerely s copy of this letter copy for purposes


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------------------------- telephone number --------------------- refer reply to cc psi b02 plr-127640-07 date date internal_revenue_service number release date index number ---------------------------------- ------------------------ ----------------------- ------------------------------------------ legend x ---------------------------------------- ------------------------ state ------------- d1 ------------------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 it was intended that x elect to be an s_corporation effective d1 however a form_2553 election by a small_business_corporation was not timely filed for x accordingly x requests a ruling that it will be treated as an s_corporation effective d1 sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for plr-127640-07 the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely melissa c liquerman senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa cbs b03 --------------------- gl-153602-06 uilc date date to area_counsel manhattan small_business self-employed from robert a miller senior technician reviewer branch collection bankruptcy summonses procedure administration subject tfrp calculation -- sequence of payment application_for partial payments of employer tax_liability in light of revproc_2002_26 this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent issue how does the internal_revenue_service apply partial payments made by a business_entity before date on its form_941 employer tax_liability where the trust fund recovery penalty tfrp liability has been assessed and the letter do has been sent to the responsible_person before date conclusion a voluntary partial payment made by a business_entity before date on its form_941 employer tax_liability where the tfrp liability has been assessed and the letter do has been sent to the responsible_person before date will be applied pursuant to the taxpayer’s written instructions a partial involuntary and or undesignated payment made under the same circumstances will be applied first to the non-trust fund portion of tax then to assessed lien fees and collection costs then assessed penalties then assessed interest then accrued penalties and accrued interest and then finally to the trust fund portion of the tax gl-153602-06 law and analysis revproc_2002_26 2002_1_cb_746 2002_15_irb_746 applies to all taxes under the internal_revenue_code except alcohol_tobacco_and_firearms taxes and harbor maintenance taxes revproc_2002_26 sec_2 this guidance states the service’s position regarding the application by the service of partial payments of tax penalty and interest to one or more taxable periods see revproc_2002_26 sec_1 revproc_2002_26 sec_3 provides that a voluntary partial payment accompanied by written directions as to its application will be applied pursuant to the taxpayer’s written instructions revproc_2002_26 sec_3 provides that partial payments remitted to the service without written direction as to the designation will be applied by the service in the order of priority that the service determines will serve its best interest emphasis added generally the order of priority that the service determines will serve its best interest means that undesignated payments are applied first to the liability with the shortest or most imminent statute_of_limitations for collections then to the liability with the next shortest statue and so on and so forth in the context of assessments where the tfrp notice letter was issued prior to date and the undesignated and or involuntary partial payment of tax was received through date the service determined that it was in its best interest to apply undesignated payments in a manner other than for successive periods in descending order of priority until the payment is absorbed effective for these assessments the service applied any undesignated and or involuntary partial payment of tax received through date first to the non-trust fund portion of tax then to assessed lien fees and collection costs then assessed penalties then assessed interest then accrued penalties and accrued interest and then finally to the trust fund portion of the tax insofar as this policy reflected the service’s interest in maximizing collection of trust_fund_taxes it is consistent with revproc_2002_26 as noted above the service will generally apply undesignated payments for successive periods in descending order of priority until the payment is absorbed but the service is not required to do so if such application does not serve its best interest revproc_2002_26 sec_3 if a different allocation is determined to be in the service’s best interest the service is not required to apply the payment in descending order of priority once a payment is applied or allocated however it should not be moved or reallocated unless the service determines that the initial application was erroneous eg the payment was designated and it was applied to the wrong period or the payment was obtained pursuant to a levy and it was applied to a period not listed on a levy a the tax period or liability with the shortest collection statute is not always the earliest or oldest tax period or liability gl-153602-06 payment should never be moved or reallocated solely to maximize collection potential or to maximize trust fund recovery penalty assessment case development hazards and other considerations ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- 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--------------------------------------------------------------------------------------------------------- this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


department of the treasury internal_revenue_service washington d c 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 contact person telephone number identification_number number release date se t e ra t pe date date uil number employer_identification_number legend a b c e f g dear -------------- this is in response to a letter from your authorized representative requesting a ruling on your behalf that you meet the requirements of revproc_95_48 1995_2_cb_418 facts the state of b is composed of various counties including c county c county is governed by an elected county council the c county council appointed a board_of trustees board to manage a a is exempt from federal_income_tax under sec_501 of the internal_revenue_code and is classified as an organization described in sec_509 and sec_170 a’s exemption_letter from the irs dated e states that it does not have to file annual form_990 due to the specific exemption contained in sec_6033 of the code for unknown reasons a’s prior cpa has filed form_990 annually for many years a does not generate any unrelated_business_income in order to reduce costs and increase efficiency a’s board combined operations with f another hospital exempt under sec_501 of the code after approval by both boards of a and f and approval by the c county council the alliance of these two hospitals resulted in the creation of a third non-profit corporation g g is also exempt under sec_501 g currently manages the assets of a and f assumed the liabilities of a and f and consolidated the operation of the healthcare facilities and services provided by a and f an equal number of board members from a and f appoint the board_of g the b supreme court has ruled that a’s participation in g does not constitute a commercial joint_venture a has no for-profit subsidiary or any affiliation with a for-profit entity g paid all the compensation of a’s officers and reported this compensation on g’s annual form_990 g also reported a’s activities on g’s annual form_990 a’s financial support is received from g a must be audited for each fiscal_year and the results presented to the board_of a which is composed of members appointed by the c county council c county officials and personnel approve all of a’s expenses c county owns a’s facilities a has no taxable subsidiary does not engage in public fund-raising efforts and its activities do not provide significant benefits to any private interest under a’s articles of incorporation if a is terminated its assets will be distributed to c county ruling requested a meets the requirements to be treated as an affiliate of a governmental_unit under revproc_95_48 1995_2_cb_418 and therefore is not required to file form_990 law sec_501 of the code provides an exemption from federal_income_tax for organizations described in sec_501 including organizations that are organized and operated exclusively for charitable educational or scientific purposes sec_6033 generally requires the filing of annual information returns by exempt_organizations sec_512 of the code defines unrelated_trade_or_business taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions directly attributable to such business activity with certain modifications sec_514 of the code defines unrelated_debt-financed_income as income produce from debt- financed property from an unrelated business as discussed in sec_512 sec_6033 of the code provides certain mandatory exceptions to filing annual information returns sec_6033 of the code provides discretionary exceptions from filing such returns where the secretary determines that such filing is not necessary to the efficient administration of the tax laws revproc_95_48 provides an exception from filing for governmental units or affiliates of governmental units that are exempt from federal_income_tax under sec_501 of the code section dollar_figure of revproc_95_48 provides that an organization will be treated as an affiliate of a governmental_unit if it is described in sec_501 of the code and either a it has a ruling from the service that its exempt_purpose income is excluded under sec_115 it is entitled to receive deductible contributions under sec_170 because the contributions are the for_the_use_of a governmental_unit or it is a wholly owned instrumentality of a state or political_subdivision for employment_tax purposes or b it meets the requirements of sec_4 b of revproc_95_48 sec_4 b of revproc_95_48 provides the following criteria to be used to determine whether an organization meets the requirements of sec_4 b the organization is either operated supervised or controlled within the meaning of sec_1_509_a_-4 of the income_tax regulations by governmental units or by an organization's governing body that is elected by the public at large the organization possesses two or more affiliation factors listed under section dollar_figure of the revenue_procedure and the organization's filing of form_990 is not otherwise necessary to the efficient administration of the internal revenue laws section dollar_figure of revproc_95_48 describes among the affiliation factors the following a the organization was created by one or more governmental units organizations that are affiliates of governmental units or public officials acting in their official capacity b the organization is subject_to financial audit by the governmental_unit to which it reports or the governmental_unit or affiliate of a governmental_unit exercises control_over or oversees some or all of the organization's expenditures and c one or more governmental units or organizations that are affiliates of governmental units exercise control_over or oversee some or all of the organization’s expenditures section dollar_figure of revproc_95_48 provides that in making a ruling or determination whether the organization’s filing of form_990 is otherwise necessary to the efficient administration of the internal revenue laws under sec_4 b iii all relevant facts and circumstances shall be considered these include the extent to which the organization has taxable subsidiaries or participates in joint ventures with non-exempt entities whether it engages in substantial public fund-raising efforts and whether its activities provide significant benefits to private interests sec_1_509_a_-4 of the regulations provides in part that the terms operated by supervised by ' and controlled by as used in sec_509 of the code presupposes a substantial degree of direction over the policies programs and activities of a supporting_organization by one or more publicly supported organizations the relationship described under any one of these terms is comparable to that of a parent and subsidiary where the subsidiary is under the direction of and accountable or responsible to the parent organization this relationship is established by the fact that a majority of the officers directors or trustees of the supporting_organization are appointed or elected by the governing body officers acting in their official capacity or the membership of one or more publicly supported organizations analysis a does not have a ruling that meets the criteria of sec_4 a of revproc_95_48 and therefore it must meet the requirements in sec_4 b the internal_revenue_service has determined that a is exempt from federal_income_tax under sec_501 of the code and is organized and operated primarily for charitable purposes to establish operate furnish and regulate health care facilities for the treatment of those persons needing surgical or medical_care all of the members of a’s board are appointed by c county thus a is operated supervised or controlled by a governmental_unit within the meaning of sec_1_509_a_-4 of the regulations accordingly a meets the requirement of sec_4 b i of revproc_95_48 a was created by the c county council therefore a possesses the affiliation factor in sec_4 a of revproc_95_48 a’s financial support is received from g which is a project approved by c county therefore a possesses the affiliation factor in sec_4 b of revproc_95_48 a must be audited for each fiscal_year and the results presented to the board_of a which is composed of members appointed by the c county council c county officials and personnel approve all of a’s expenses therefore since a is financially accountable to a governmental_unit a possesses the affiliation factor in sec_4 c of revproc_95_48 under a’s articles of incorporation if a is terminated its assets will be distributed to c county therefore a possesses the affiliation factor in sec_4 e of revproc_95_48 therefore since a possesses two or more of the affiliation factors listed in section dollar_figure of revproc_95_48 a meets the requirements of sec_4 b ii a has no taxable subsidiary does not participate in a joint_venture with any for-profit entity does not engage in substantial public fund-raising efforts and does not provide significant benefits to private interests a’s hospital activities are already reported on g’s annual form_990 therefore since the filing of form_990 is not otherwise necessary to the efficient administration of the internal revenue laws a meets the requirement of sec_4 b iii of revproc_95_48 since a is described in sec_501 of the code and meets the requirements of sec_4 b of revproc_95_48 a is treated as an affiliate of a governmental_unit under section dollar_figure of revproc_95_48 ruling a meets the requirements to be treated as an affiliate of a governmental_unit under revproc_95_48 and therefore is not required to file form_990 this ruling 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 please keep a copy of this ruling in your permanent records this ruling is based on the understanding that there will be no material changes in the facts upon which it is based this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative thank you for your cooperation sincerely yours s lawrence m brauer acting manager exempt_organizations technical group enclosure notice


internal_revenue_service number release date index number ---------------------------------- ------------------------------------------------ ------------------------------ 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-137403-16 date date legend decedent spouse date date ------------------------------------------------------- ------------------------------------------------------- ---------------------- -------------------- dear -------------- this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a timely form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election plr-137403-16 spouse as executor of decedent’s estate represents that the value of decedent’s gross_estate is less than the basic exclusion amount in the year of decedent’s death including any taxable_gifts made during her lifetime spouse as executor requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-137403-16 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 plr-137403-16 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date spouse as executor represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly-prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-137403-16 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries leslie h finlow _____________________________ by leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-108848-02 date date legend x d1 dear this responds to your letter submitted date on behalf of x in which you requested relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 the shareholders of x intended it to be treated as an s_corporation effective on d1 however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 allows a small_business_corporation to elect to be treated as an s_corporation sec_1362 provides the rules as to when such an election will become effective sec_1362 states in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 b provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines that there was reasonable_cause for the failure to cc psi b1-plr-108848-02 timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that year x did not timely file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective d1 within days from the date of the letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ----------------------------- ------------------------------ -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ----------- telephone number ---------------------- refer reply to cc psi plr-110161-18 date date re -------------------------------------------------------------------------- legend - --------------------------------------------------------- - ------------------------------------------------------ - --------------------- - ------- - --------------- - ------------------------------------------------------------------------ donor spouse date year year trust ---------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------ company - -------------------------------- dear -------------------- this letter responds to the letter dated march submitted by your authorized representative requesting an extension of time pursuant to sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_2632 to opt_out of the generation-skipping_transfer gst_exemption automatic allocation rules under sec_2632 with respect to transfers to a_trust facts the facts submitted and the representations made are as follows on date in year a date prior to date donor created trust an irrevocable_trust for the benefit of his children and children’s issue trust has generation-skipping_transfer gst tax potential plr-110161-18 prior to date donor and spouse made gifts to trust but did not allocate their gst_exemption to trust subsequent to date donor made gifts to trust in year sec_2 through donor retained the tax department of company a family owned company to advise and prepare donor’s year through form sec_709 united_states gift and generation- skipping transfer_tax return reporting the year through transfers to trust both donor and spouse elected to split the gifts to trust for those years although donor and spouse did not intend for their gst_exemption to be allocated to the year through transfers company’s tax professionals failed to advise donor or spouse of the rules under sec_2632 regarding the automatic allocation of gst_exemption and the ability to elect out of the automatic allocation of gst_exemption by making an election under sec_2632 therefore donor and spouse failed to elect out of the automatic allocation of gst_exemption for the year through transfers to trust the tax department discovered these errors upon review of the form sec_709 donor requests an extension of time to elect out of the automatic allocation rules with respect to donor’s year through transfers to trust law and analysis sec_2601 imposes a tax on every generation-skipping_transfer gst made by a transferor to a skip_person a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of gst tax imposed by sec_2601 is the taxable_amount multiplied by the applicable_rate sec_2641 defines the applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2631 provides that for purposes of sec_2631 the gst_exemption amount for any calendar_year shall be equal to the basic exclusion amount under sec_2010 for such calendar_year sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed plr-110161-18 for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that the manner in which allocations are to be made shall be prescribed by forms or regulations issued by the secretary sec_2632 provides that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption is treated as allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred under sec_2632 the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust as defined in sec_2632 under sec_2632 a gst_trust is a_trust that could have gst potential with respect to the transferor unless the trust satisfies any of the exceptions listed in sec_2632 i - vi sec_2632 provides that an individual may elect to have the automatic allocation rules of sec_2632 not apply to an indirect_skip or any or all transfers made by such individual to a particular trust sec_2632 provides that the election may be made on a timely filed gift_tax_return for the calendar_year for which the election is to become effective sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides in part that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to any transfer or transfers constituting an indirect_skip made to a_trust a transferor may elect out with respect to one or more or all current-year transfers made by the transferor to a specified trust or trusts sec_26_2632-1 provides that to elect out the transferor must attach an election out statement to a form_709 filed within the time period provided in sec_26 b iii c in general the election out statement must identify the trust and specifically must provide that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers under sec_26 b iii c to elect out the form_709 with the attached election out statement must be filed on or before the due_date for timely filing the form_709 for the calendar_year in which the transfer to be covered by the election out was made sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c plr-110161-18 sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides an automatic_extension of time for making certain elections sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-3 provides in part that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly donor is granted an extension of time of days from the date of this letter to make an election under sec_2632 that the automatic allocation rules do not apply to the year through transfers to trust donor should make the election on supplemental form sec_709 for year through the supplemental form sec_709 should be filed with the cincinnati service_center at the following address internal_revenue_service center cincinnati oh a copy of plr-110161-18 this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose 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 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely associate chief_counsel passthroughs and special industries lorraine e gardner by _____________________________ lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter -------- d


significant index number j tar exempr and government entities division department of the treasury internal_revenue_service washington d c feb set ep che re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of january ___ for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning january bases established as of january of dollar_figure this extension applies to the eligible amortization charge _ which result in a net unfunded_liability as of that date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the and to the this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours pe cm david m ziegler manager ep actuarial group


t c summary opinion united_states tax_court darel guy taken jr petitioner v commissioner of internal revenue respondent docket no 10728-o0s filed date darel guy taken jr pro_se j anthony hoefer for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined deficiencies in and additions to ' unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for and the taxable years in issue - - petitioner’s federal income taxes for the years and in the amounts as follows additions to tax_year deficiency sec_6651 a sec_6651 a sec_6654 a dollar_figure dollar_figure --- dollar_figure big_number dollar_figure dollar_figure dollar_figure big_number dollar_figure dollar_figure dollar_figure the issues for decision are as follows whether petitioner filed a federal_income_tax return for any of the years in issue we hold that he did not whether petitioner is liable for the deficiencies in income taxes and the additions to tax as determined by respondent in the notices of deficiency we hold that he is whether respondent erroneously credited overpayments allegedly claimed by petitioner on returns for prior years against past due child_support liability for which petitioner disputes we hold that we lack jurisdiction to decide this matter background’ some of the facts have been stipulated and they are so found petitioner resided in north buena vista iowa at the time that his petition was filed with the court the documentary record that was developed at trial was unsatisfactory accordingly the court held the record open for days so that the parties could produce specific documentary_evidence respondent produced what was requested petitioner did not a facts relating to petitioner’s tax_liabilities for the years in issue during and the taxable years in issue petitioner was employed by the chicago central pacific railroad the railroad and received compensation in the amounts of dollar_figure dollar_figure and dollar_figure respectively the railroad withheld federal_income_tax from petitioner’s compensation in the amounts of dollar_figure and dollar_figure for and respectively the railroad did not withhold any federal_income_tax from petitioner’s compensation_for during and petitioner received interest_income as follows payor homeland bank na dollar_figure dollar_figure --- firstar bank of iowa na - dollar_figure towa community credit_union - --- magna bank na _ oo _82 during petitioner received gambling winnings paid_by two casinos belle of sioux city iowa in the amount of dollar_figure and harvey’s of council bluffs iowa in the amount of dollar_figure belle of sioux city withheld federal_income_tax in the amount of dollar_figure from petitioner’s gambling winnings harvey’s of council bluffs did not withhold any federal_income_tax from petitioner’s gambling winnings during the years in issue petitioner was unmarried and had no dependents within the meaning of sec_152 q4e- petitioner did not file a federal_income_tax return for any of the years in issue nor did petitioner pay estimated_tax for any of those years b facts relating to the setoff of alleged overpayments for prior years petitioner and his ex-wife separated in and were divorced in by virtue of the separation and divorce petitioner became obligated to pay child_support petitioner’s testimony at trial petitioner testified that from through early he paid child_support directly to his ex-wife by personal and certified check that in date his ex-wife filed a complaint against him with the iowa state support enforcement office for nonpayment of child_support and that his ex-wife’s complaint was completely unfounded according to petitioner the support enforcement office would not recognize the payments that he had made by check and that as a consequence the enforcement office improperly commenced collection action against him the collection action to which petitioner alludes was described by him at trial as follows --- - petitioner in december ‘87 my ex-wife went to the support enforcement office here in iowa -- i was living in the state of washington -- and she made the complaint to them that i had never paid her and there was absolutely no truth to that the court okkay petitioner but the support enforcement office is to this day using that same complaint to take my federal and state income taxes and always have the court well no wait a minute mr taken you’ re saying the support enforcement office is taking your federal_income_tax refunds petitioner in letters that i have received from them they are claiming that they are taking them but when i come back and say what have i paid for the year there’s no record of it between ‘87 and ‘94 there is no record of them taking any of my wages which they did do they started in ‘89 they started garnishing my wages but from ‘83 until december ‘87 when she the ex-wife filed this complaint they won’t recognize the payments that i’ve made and this is why they’re taking my income_tax returns sic according to petitioner he claimed overpayments on his tax returns for through but never received a refund check petitioner’s strategy to avoid withholding in petitioner began writing exempt on form_w-4 employee’s withholding allowance certificate which he filed with the railroad using this stratagem petitioner virtually eliminated withholding in significantly reduced withholding in and completely eliminated withholding in at trial petitioner testified that he adopted this strategy out of pure frustration because no one would inform him regarding the -- - disposition of his alleged refunds for prior years respondent’s records respondent introduced a certification under seal attesting to the fact that respondent’s master_file does not include any record of petitioner's having filed a federal_income_tax return for any of the years in issue respondent introduced a second certification under seal attesting to the lack of record of petitioner having filed a federal_income_tax return for any of the years through in contrast respondent introduced certificates under seal reflecting transcripts of account for and years for which the transcripts demonstrate that petitioner filed federal_income_tax returns the transcript for indicates that petitioner claimed an overpayment in the amount of dollar_figure which was refunded on date the transcript for indicates that on date petitioner claimed an overpayment in the amount of dollar_figure which was offset against an outstanding liability on that same date cc the notices of deficiency in date respondent issued separate notices of deficiency to petitioner determining deficiencies in and additions to petitioner’s income taxes for and for each of those years respondent determined that petitioner failed to file an income_tax return and that petitioner received - gross_income in the form of compensation interest and for gambling winnings discussion a petitioner’s status as a nonfiler petitioner testified at trial that he filed a federal_income_tax return for each of the years in issue however we are unable to accept petitioner’s testimony at face value see 87_tc_74 58_tc_560 kropp v commissioner tcmemo_2000_148 at trial petitioner did not offer a retained copy of any such purported return nor did petitioner ever offer a retained copy to respondent during either the examination or pretrial stage of this case indeed petitioner offered nothing more than his own testimony in support of his contention that he filed a return for each of the years in issue in contrast respondent introduced certificates under seal attesting to the lack of record of petitioner having filed a federal_income_tax return for any of the years in issue this evidence coupled with what appears to be a substantial history of nonfiling as well as what we regard as the infinitesimal possibility that respondent or the postal service would lose petitioner’s return for years in a row supports our finding of fact supra that petitioner did not file a federal_income_tax return for any of the years in issue b petitioner’s tax_liabilities sec_1 imposes a tax on the taxable_income of unmarried individuals sec_63 defines taxable_income as applicable to petitioner’s situation as gross_income less the standard_deduction and one personal_exemption sec_61 a defines gross_income to mean all income from whatever source derived specifically including compensation_for services and interest sec_61 given the broad phraseology of sec_61 courts have consistently held that gambling winnings are also includable in gross_income see eg lyszkowski v commissioner tcmemo_1995_235 and cases cited therein affd without published opinion 79_f3d_1138 cir as detailed above petitioner's taxable_income for the years in issue is as follows compensation dollar_figure dollar_figure dollar_figure interest_income gambling winnings big_number gross_income big_number big_number big_number less personal_exemption --big_number --big_number --big_number standard_deduction -big_number -big_number --big_number taxable_income big_number big_number big_number pursuant to sec_1 petitioner’s tax_liabilities for the years in issue are as follows dollar_figure dollar_figure sdollar_figure ke oo oo l a no no a --- - because petitioner did not file income_tax returns for the years in issue petitioner’s tax_liabilities for those years constitute deficiencies in income taxes see sec_6211 in view of the foregoing we hold that petitioner is liable for the deficiencies in income taxes as determined by respondent in the notices of deficiency c additions to tax for failure_to_file as applicable to petitioner sec_6012 a a requires that an income_tax return be filed by every individual who has gross_income equal to or greater than the sum of the standard_deduction and one personal_exemption for an individual who is a calendar-year taxpayer the return is due on or before the day of april following the close of the taxable_year see sec_6072 a sec_6651 imposes an addition_to_tax for failure_to_file a timely return the addition_to_tax may be avoided if the failure_to_file is due to reasonable_cause and not willful neglect reasonable_cause contemplates that the taxpayer exercised ordinary business care and prudence and was nonetheless as acknowledged by respondent petitioner’s net tax_liabilities for the years in issue are as follows tax_liability dollar_figure dollar_figure dollar_figure less withholding by the railroad -412 -big_number --- by belle sioux city net tax_liability big_number big_number big_number - unable to file a return within the prescribed time 469_us_241 sec_301_6651-1 proceed admin regs willful neglect means a conscious intentional failure or reckless indifference united_states v boyle supra pincite in the present case petitioner failed to file income_tax returns for the years in issue notwithstanding the fact that his gross_income far exceeded the threshold_amount that triggered the filing requirement for each year petitioner offered no evidence whatsoever that would support a finding that his failure_to_file was due to reasonable_cause and not willful neglect in view of the foregoing we hold that petitioner is liable for the additions to tax under sec_6651 as determined by respondent in the notices of deficiency d additions to tax for failure to pay and sec_6651 imposes an addition_to_tax for failure to pay the amount shown as tax on a return on or before the date prescribed for payment of such tax the addition_to_tax may be avoided if the failure to pay is due to reasonable_cause and not sec_6651 provides that in the case of any return made by the commissioner under sec_6020 such return shall be treated as the return filed by the taxpayer for purposes of determining the amount of the addition_to_tax under sec_6651 sec_6651 applies in the case of any return the due_date for which determined without regard to extensions is after date see taxpayer bill of right sec_2 publaw_104_168 110_stat_1475 thus sec_6651 applies only to petitioner’s and returns willful neglect reasonable_cause contemplates that the taxpayer exercised ordinary business care and prudence in providing for payment of the taxpayer’s tax_liability and was nonetheless unable to pay the tax or would suffer an undue_hardship if the tax were paid within the prescribed time sec_301_6651-1 proced admin regs willful neglect means a conscious intentional failure or reckless indifference united_states v boyle supra pincite in the present case petitioner paid only a relatively small portion of his tax_liability for and failed to pay any of his tax_liability for petitioner offered no evidence whatsoever that would support a finding that his failure to pay was due to reasonable_cause and not willful neglect in view of the foregoing we hold that petitioner is liable for the additions to tax under sec_6651 as determined by respondent in the notices of deficiency be additions to tax for failure to pay estimated_tax sec_6654 imposes an addition_to_tax for failure to pay estimated_tax as applicable herein imposition of the addition is mandatory whenever prepayments of tax either through withholding or the making of estimated quarterly tax_payments during the course of the taxable_year do not equal the percentage of total liability required under the statute see sec_6654 99_tc_202 - 75_tc_1 thus in the present case we need not address any issue relating to reasonable_cause and lack of willful neglect extenuating circumstances are simply irrelevant see 33_tc_1071 see also grosshandler v commissioner supra pincite in the present case petitioner failed to pay estimated_tax for any of the years in issue moreover only a negligible portion of petitioner’s tax_liability for was paid through withholding only a relatively small portion of petitioner’s tax_liability for was paid through withholding and none of petitioner’s tax_liability for was paid through withholding in view of the foregoing we hold that petitioner is liable for the additions to tax under sec_6654 as determined by respondent in the notices of deficiency f jurisdiction over the crediting of alleged overpayments as we understand his argument petitioner contends that his federal tax refunds for through were intercepted and applied against child_support_obligations for through that he did not owe because in petitioner’s view his refunds we should not be understood to imply that petitioner had reasonable_cause or that there were any extenuating circumstances relating to petitioner’s failure to pay estimated_tax factually the record does not fully support petitioner’s contention for through were improperly intercepted those refunds are now available to satisfy his liabilities for the years in issue sec_6402 provides in part as follows sec_6402 offset of past--due support against overpayments --the amount of any overpayment to be refunded to the person making the overpayment shall be reduced by the amount of any past-due_support owed by that person of which the secretary has been notified by a state the secretary shall remit the amount by which the overpayment is so reduced to the state collecting such support to the extent that petitioner may be seeking to invoke the overpayment jurisdiction of this court see sec_6512 it is clear that we have no jurisdiction under that section to restrain or review any credit or reduction made by the secretary under sec_6402 see sec_6512 see also sec_6402 e which bars any court of the united_states including this court from hearing any_action that is commenced to restrain or review a reduction authorized by sec_6402 ’ columbus v commissioner tcmemo_1998_60 affd without published opinion 162_f3d_1172 cir to the extent that petitioner may be seeking to minimize his liabilities for the years in issue it is equally clear that we ’ sec_6402 was redesignated sec_6402 by the internal_revenue_service restructuring and reform act of rra publaw_105_206 sec a 112_stat_779 sec_6402 e prior to redesignation applies to refunds payable under sec_6402 on or before date see rra sec d 112_stat_781 lack jurisdiction to restrain or review any credit or reduction made by the secretary under sec_6402 further payments are not taken into account in determining redetermining the commissioner t commissioner t c x do not serve of sec_6211 c amount of a deficiency see memo payments made by to reduce the ‘deficiency’ within reviewed and adopted as the report of the small division in order to give effect to the foregoing see sec eg e with exceptions not relevant to the present case or logan v clarke vv a taxpayer the meaning tax case decision will be entered for respondent


t c memo united_states tax_court eric d fultz and sandra a fultz petitioners v commissioner of internal revenue respondent docket no filed date jon j jensen for petitioners blaine holiday for respondent memorandum findings_of_fact and opinion goeke judge petitioners petitioned the court to redetermine deficiencies respondent determined in their federal income taxes for and of dollar_figure and dollar_figure respectively some of the adjustments in respondent’s original determinations are no longer disputed the issue remaining for decision is whether petitioners are liable for self-employment_tax under section on value-added payments that eric fultz mr fultz received from an agricultural_cooperative we hold the value-added payments are subject_to the self-employment_tax findings_of_fact some of the facts have been stipulated the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioners husband and wife resided in tracy minnesota at the time their petition was filed during all relevant years mr fultz was a farmer and ran a farm operation involving grain and livestock sandra fultz mrs fultz was a store manager fultz farms inc fultz farms inc fultz farms was incorporated in date by bernard fultz mr fultz’s father during the years at issue petitioners owned approximately acres of farm 1respondent has conceded an adjustment in a ag rent-se income for and along with the corollary and computational adjustments associated with that adjustment in addition petitioners presented no argument nor provided any evidence with regard to adjustments b dividends or d patronage_dividends for either year and therefore have conceded those adjustments 2unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts are rounded land which they leased to fultz farms fultz farms was involved in growing crops such as corn and soybeans and hog farming the corn and grain grown on the farm also provided feed for livestock during the years in issue dennis fultz mr fultz’s brother was president of fultz farms and mr fultz was vice president secretary and treasurer of fultz farms dennis fultz and mr fultz were also directors during and mr fultz owned percent of fultz farms minnesota corn processors in approximately minnesota corn processors mcp an agricultural_cooperative was formed under the laws of the state of minnesota by a group of minnesota farmers mcp’s goal was to collectively provide a corn processing capability to its members and to realize profits for the members based upon the increased values of that processed corn had mcp not been created petitioners and other farmers would have been limited to selling their corn as raw corn and the processing profits would have been realized by others mcp’s articles of incorporation authorized it to issue big_number shares of common_stock at dollar_figure per share and big_number shares of nonvoting preferred_stock at dollar_figure per share the shares of such stock could be held only by producers of agricultural 3bernard fultz resigned as vice president of fultz farms in date and as a director of fultz farms sometime between date and date products who reside in the territory served producers referred to persons actually engaged in the production of one or more of the agricultural products handled by mcp producers of agricultural products eligible for membership and having acquired a minimum of shares of common_stock of mcp were recognized as members a units of equity participation mr fultz purchased shares of stock in mcp in approximately date when mcp was first organized subsequently before date mrs fultz also acquired stock in mcp both petitioners held enough shares of mcp stock in to qualify as members of mcp as members they were able to purchase additional units of equity participation units in mcp between date and date mr fultz purchased a total of big_number units during the years in issue mr fultz purchased big_number units in date and big_number units in date in addition mr fultz executed a subscription agreement in date in which he agreed to pay for an additional big_number units with a 10-percent downpayment immediately and the remainder due in two later installments the record does not indicate whether this transaction was completed mrs fultz purchased big_number units in date and big_number units in date each unit represented one potential bushel of corn that the member might agree to supply to mcp in order to supply corn to mcp a producer was required to hold at least big_number units corn producers who wished to supply corn to mcp were also required annually to execute a uniform marketing agreement uma the producer was obligated to deliver to mcp the number of bushels provided in the uma although both petitioners were members of mcp the record contains only umas executed by mr fultz b umas between mcp and mr fultz mr fultz executed a uma dated date for the year and also executed a uma for but that agreement is not a part of the record collectively the units and the umas defined the scope of mr fultz’s obligation to mcp pursuant to the umas between mr fultz and mcp mr fultz was obligated to deliver to mcp a certain amount of corn during each processing year the umas outlined the terms with respect to production processing and marketing of the corn the umas mr fultz executed in and obligated mcp to process the grain each year in a manner it deemed to be in the best interests of the cooperative and its members and to market the processed corn products at the best price that could be obtained on the open market mr fultz was obligated to acquire and deliver the corn to mcp in the umas mr fultz appointed mcp as his agent 4mcp’s processing year started on the first day of october of each year and ended on the last day of september of the following year in both the selling and marketing of the corn committed to mcp in addition mcp had sole and complete discretion in all phases of the marketing activity the and umas did not obligate fultz farms only mr fultz and mcp were parties to the agreements the umas specified that mcp was obligated to pay mr fultz for delivered corn as follows an initial payment of percent of the loan value per bushel of corn delivered within days of mcp’s acceptance of the corn storage and interest payments for corn delivered after october of each processing year an additional payment value-added payment for the value added to the corn during its processing by mcp which was to be based on a yearend determination of mcp’s net_proceeds from all of its operations which would further compensate mr fultz for his corn and still allow mcp to retain its financial integrity and patronage_dividends under the umas mr fultz was required to produce and deliver corn to mcp for processing three times a year october through january february through may and june through september giving approximately a third of the total required annual quantity at each delivery time mr fultz was free to satisfy his delivery obligations through several means he could meet these obligations to mcp with corn that was grown on his own farm or acquired on the open market by hiring an outside grower or from pool corn pool corn was corn maintained by mcp and made available for members to use in order to meet their production and delivery obligations under the umas a member using pool corn completed a pool corn certificate which required that member to check a box on the certificate requesting that the obligation be fulfilled through the pool and to charge the member’s account with an acquisition fee of cents per bushel or the going charge at that time for this service any check that was sent to mr fultz in payment for delivered corn would have been offset by whatever charge he had incurred for the pool corn the pool corn certificates were sent directly to mr fultz not fultz farms if fultz farms fell short of corn to satisfy mr fultz’s obligation to mcp on some occasions corn was purchased by fultz farms from a local elevator in lieu of using pool corn petitioners’ and tax years a leases between petitioners and the corporation in mr fultz executed a lease agreement with fultz farms this lease remained effective in and and reflected petitioners as lessors and fultz farms as lessee the lease provided that petitioners would receive rent from fultz farms for a house farm_land and mcp shares because of the parties’ partial settlement only the mcp shares are relevant to this opinion the lease rate on mcp shares rented from petitioners wa sec_50 cents per bushel of corn delivered to mcp mcp was not a party to the lease arrangement and fultz farms was neither a shareholder nor a member of mcp in and mr fultz personally received value-added payments from mcp by check when mr fultz received the checks for value-added payments from mcp in his name he deposited the checks within a day or two and he or mrs fultz then wrote out personal checks to fultz farms for the same amounts b petitioners’ member activity with mcp in mr fultz received value-added payments from mcp of dollar_figure and in he received dollar_figure in value-added payments for both years processed corn had a higher fair_market_value than raw corn the amounts of the value-added payments had no impact on the amount petitioners were to receive under the leases fultz farms had no contractual relationship with mcp with respect to the value-added payments for both and fultz farms experienced shortfalls in the required bushels mr fultz was to produce as a result mr fultz had to purchase big_number bushels of pool corn in to supplement the big_number bushels actually delivered and big_number bushels of pool corn in to supplement the big_number bushels actually delivered c petitioners’ income_tax returns and respondent’s determinations petitioners timely filed their and federal_income_tax returns with respect to self-employment_tax petitioners did not complete and attach to either return a schedule se computation of self-employment_tax respondent made adjustments to mr fultz’s self-employment_income of dollar_figure for and dollar_figure for which reflect the amounts he ultimately received from fultz farms per the lease related to the value-added payments and in each year the adjustment is less than the actual value-added payments to mr fultz we accept this as a partial concession by respondent but our holding is based upon the original payments from mcp to mr fultz not petitioners’ relationship with fultz farms respondent completed and attached to the notice_of_deficiency schedules se for mr fultz’s self-employment_tax for the years at issue no self-employment_tax was determined for mrs fultz for or respondent also determined that petitioners are entitled to a deduction equal to one-half of the amount of mr fultz’s self-employment_tax liability opinion this case presents the question whether value-added payments mr fultz received from mcp a minnesota agricultural_cooperative are subject_to self-employment_tax under sec_1401 payments from mcp have previously been the subject of decisions of this court and the court_of_appeals for the eighth circuit where an appeal of this case would lie in 118_tc_138 affd 353_f3d_595 8th cir this court held and the court_of_appeals affirmed that value-added payments received by members of mcp were subject_to self-employment_tax and that the self-employment_income of a member of mcp includes income that the member derives from the business conducted by mcp as an agent of the member it has been stipulated that before the period in dispute mr fultz purchased shares of stock in mcp and units of equity participation mr fultz entered into umas with mcp in which he represented he was a producer or owner of the corn he would deliver under the mcp program corn was delivered to mcp to meet his obligation on his accounts to mcp and he received value- added payments from mcp all these factors were present in bot nevertheless petitioners maintain the present case should be distinguished from bot because they entered into a lease agreement with fultz farms under which they purportedly assigned to fultz farms all their responsibilities and duties as holders of the units and all the value-added payments due from mcp petitioners also assert that although mr fultz received the checks representing the value-added payments from mcp petitioners immediately wrote a check to fultz farms for the full amount of each check issued to mr fultz by mcp petitioners maintain that once fultz farms was incorporated they no longer had the assets and ability needed to grow the corn required by mr fultz’s equity participation in mcp petitioners represent that fultz farms assumed the obligation to produce the corn for mcp pursuant to the lease and the payments they personally received from fultz farms were akin to the rent on the farm real_estate paid to them by fultz farms accordingly petitioners argue they were not subject_to self-employment_tax see 236_f3d_410 8th cir revg tcmemo_1999_333 this dispute is simply stated as whether the lease arrangement with fultz farms precludes the inclusion of the mcp value-added payments in mr fultz’s self-employment_income there are several aspects of the umas with mcp and the facts regarding the mcp payments that present impediments to petitioners’ position to purchase units in mcp the purchaser was required to own stock in mcp mr fultz owned the mcp stock fultz farms did not mr fultz entered into the umas with mcp which appointed mcp as his agent and he agreed to deliver the requisite quantities of corn to mcp each year fultz farms was not a party to any agreement with mcp in his agreement with mcp mr fultz represented himself as the grower or owner of corn mr fultz was personally obligated to mcp and personally benefited from his agreements with mcp through the receipt of payments from mcp petitioners’ position presents an argument analogous to the taxpayers’ argument in bot v commissioner supra the bots argued that their intent in purchasing the mcp equity units was to make an investment they reasoned that this subjective intent prevented the application of the self-employment_tax to the proceeds received from mcp this court and the court_of_appeals for the eighth circuit rejected this argument the court_of_appeals explained why the bots’ argument failed despite their assertions that they bought the units of participation as an investment the program operated on the basis that they were producers or owners of the corn delivered under the program and that mcp acted as their agent in further processing and marketing the corn the bots should be held to their representations if they want the benefits of the coop program they must bear the burdens as well cf estate of 268_f3d_553 8th cir once chosen the taxpayers are bound by the consequences of the transaction as structured even if hindsight reveals a more favorable tax treatment bot v commissioner f 3d pincite this reasoning applies to petitioners’ assertion that they assigned their rights under the mcp agreements to fultz farms because petitioners’ purported assignment did not bind mcp fultz farms did not own any stock in mcp was not a member of mcp and would not have been able to contract with mcp for the delivery of the corn mcp paid mr fultz not fultz farms as the grower or owner of the corn and mcp acted as mr fultz’s agent in marketing the corn accordingly we find this case is controlled by 118_tc_138 and thus hold the payments from mcp must be included in mr fultz’s income from self- employment in light of the foregoing and to reflect concessions by the parties decision will be entered under rule


internal_revenue_service department of the treasury index number u i l washington dc person to contact telephone number refer reply to cc dom p si plr-109387-99 date date number release date legend company state shareholder a this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated under the laws of state company has one shareholder shareholder it is represented that company has intended to be an s_corporation since its incorporation believing itself to be an s_corporation company operated accordingly since its incorporation after the end of its taxable_year beginning on a however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on a sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on a however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of a with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc corp - plr-107796-02 date may legend purchaser target seller date b date c date d company official company official dear this letter responds to a letter dated date submitted on behalf of purchaser and seller by their authorized representative requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election purchaser and seller are requesting an extension to file a sec_338 election under sec_338 and sec_338 of the internal_revenue_code and sec_1_338_h_10_-1 of the income_tax regulations with respect to purchaser’s acquisition of the stock of target sometimes hereinafter referred to as the election on date b all citations in this letter to regulations under sec_338 are to regulations in effect on date b additional information was received in a letter dated date the material information is summarized below plr-107796-02 purchaser is a professional services organization target was an s_corporation engaged in the business of consulting services seller owned of the stock of target on date b purchaser and seller entered into a stock purchase agreement for purchaser to acquire all of the target stock from seller for a stated amount of cash payable in two installments under the stock purchase agreement purchaser was to pay the first installment in cash cashier’s check certified check or wire transfer of immediately available funds on the date one year subsequent to the closing date purchaser was to pay the second installment in cash cashier’s check certified check or wire transfer of immediately available funds on the date two years subsequent to the closing date it is represented that purchaser’s acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 on date d purchaser liquidated target purchaser and seller intended to file the election the election was due on date c but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for purchaser’s target’s or seller’s taxable years in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase sec_338 permits the purchasing and selling corporations to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the proceeds in complete_liquidation a sec_338 election may be made for target only if it is a member of a selling_consolidated_group a member of a selling affiliated_group filing separate returns or an s_corporation sec_1_338_h_10_-1 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 plr-107796-02 in this case the time for filing the election is fixed by the regulations ie sec_1_338_h_10_-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser and seller to file the election provided purchaser and seller show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser company official company official and seller explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that purchaser and seller have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date on this letter for purchaser and seller to file the election with respect to the acquisition of the stock of target as described above the above extension of time is conditioned on the filing within days of the date on this letter of all returns and amended returns if any necessary to report the transaction in accordance with the election and the taxpayers' purchaser's seller’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 purchaser and seller must file the election in accordance with sec_1_338_h_10_-1 that is a new election on form_8023 must be executed on or after the date on this letter which grants an extension and filed in accordance with the instructions to the form a copy of this letter must be attached to the election form purchaser and seller must file or amend as applicable their returns to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year and to attach to the returns a copy of this letter and a copy of the election we express no opinion as to whether the acquisition sale of the target stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target stock qualifies for sec_338 treatment or any other plr-107796-02 tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply purchaser must provide seller with a copy of this letter this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter has been sent to the taxpayer cc sincerely yours ken cohen senior technician reviewer branch office of assistant chief_counsel corporate