ii hn aas ss department of the treasury internal_revenue_service te_ge eo examination fulton street room brooklyn ny tax_exempt_and_government_entities_division number release date legend org organization name date date xx date uil org address dear taxpayer_identification_number person to contact identification_number contact telephone number last date for filing a pleading with the tax_court the claims_court or the united_states district_court for the district of columbia march 20xx this is a final_determination regarding your exempt status under sec_501 of the internal_revenue_code irc recognition of your exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 is retroactively revoked to january 20xx because you have not established that you are operated exclusively for exempt purposes sec_501 exempts from taxation organizations which are organized and operated exclusively for religious charitable or educational_purposes no part of the net_earnings of which inure to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation and which do not participate in or intervene in any political campaign on behalf of or in opposition to any candidate for public_office sec_1_6001-1 of the regulations requires that each person required to file a return maintain books_and_records to allow the service to establish whether the taxpayer is liable for any_tax liability in addition to the general recordkeeping rules organizations_exempt_from_taxation under sec_501 must also maintain the records required by sec_6033 of the code you failed to meet the requirements of sec_1_501_c_3_-1 in that you have failed to establish that you were operated exclusively for an exempt_purpose you have failed to file the required tax form form_990 for the year ended december 20xx and you failed to demonstrate that you are observing the conditions necessary for continuation of your exempt status we are revoking your exemption from federal_income_tax as an organization described in sec_501 of the internal_revenue_code effective january 20xx contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for all years beginning january processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must file a pleading seeking a declaratory_judgment in the united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia before the day after the date this final_determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing pleadings for declaratory judgments and refer to the enclosed publication you may write to these courts at the following addresses you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call too-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours marsha a ramirez director eo examinations enclosure publication tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service commerce street m c dallas texas taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail -- return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization's exempt status is necessary if you do not agree with our position you may appeal your case the enclosed publication the examination process explains how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if you request a conference we will forward your written_statement of protest to the appeals_office and they will contact you enclosed for your convenience an envelope is if you and appeals do not agree on some or all of the issues after your appeals_conference or if you do not request an appeals_conference you may file suit in united_states tax_court the united_states court of federal claims or united_states district_court after satisfying procedural and jurisdictional requirements as described in publication letter catalog number 34801v m r you may also request that we refer this matter for technical_advice as explained in publication exempt_organization appeal procedures for unagreed issues lf a determination_letter is issued to you based on technical_advice no further administrative appeal is available to you within the irs on the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we if you accept our findings please sign and return the enclosed form_6018 consent to proposed adverse action we will then send you a final letter modifying or revoking exempt status will process your case on the basis of the recommendations shown in the report of examination and this letter will become final in that event you will be required to file federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and letter catalog number 34801v thank you for your cooperation sincerely marsha a ramirez director e o examinations enclosures publication publication form_6018 report of examination envelope letter catalog number 34801v form 886-a explanation of items year ended 20xx insti exhibit no name of taxpayer org legend org organization name xx date president president issue should the tax exempt status under internal_revenue_service sec_501 of org be revoked facts org was recognized by the internal_revenue_service as a tax exempt_organization under c of the internal_revenue_code in february 19xx the organization’s owner president the only officer of the organization has been deceased since july 20xx and therefore no activities have been conducted since thin the agent also received a faxed copy of president’s death certificate from a third party an examination was also conducted by the state of xyz department of justice but they were not able to find president due to his death a contact letter was sent to the organization at the last_known_address located on accurint the organization has never filed the form_990 law internal_revenue_code sec_501 provides for tax exemption to organizations organized and operated exclusively for charitable purposes and no part of the net earning which inures to the benefit of any individual regulation sec_1_501_c_3_-1 organizational and operational tests provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt regulation sec_1_501_c_3_-1 provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose regulation sec_1_501_c_3_-1 provides an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus to meet the requirement of this subdivision it is necessary for an department of the treasury - internal_revenue_service form 886-a form 886-a explanation of items year ended 20xx eeneeulelcr exhibit no name of taxpayer org legend org organization name xx date president president organization to establish that it is not organized or operated for the benefit of private interests such as the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests sec_1_6033-2 of the income_tax regulations provides in part that every organization which is exempt from tax shall submit such additional information as may be required by the internal_revenue_service for the purposes of inquiring into its exempt status revrul_59_95 provides that a failure_to_file required information_return or comply with the provision of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status government’s position president president the sole officer passed away in july 20xx no activities have been conducted since then therefore since the only principal is deceased there are no current activities and based on third party information revocation of the organization is proposed effective january 20xx taxpayer’s position not available conclusion the organization should be revoked effective january 20xx department of the treasury - internal_revenue_service form 886-a


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jun svgnihcom hudezn -o0 the palts legend hospital a company m plan x contract c association y bank o account w state s court n this is in response to a letter dated date as supplemented by correspondence dated date date and date in which your authorized representative requests on your behalf a series of letter rulings under sec_401 sec_415 sec_402 sec_511 and sec_512 of the internal_revenue_code the following facts and representations support your ruling_request hospital a maintains plan x which is a money_purchase_pension_plan intended to meet the requirements of sec_401 of the code from the inception of plan x until date plan x's assets were held in their entirety in contract c a group_annuity_contract issued by company m the form of contract c as well as the original plan documentation was negotiated by association y and company m although hospital a is a member of association y it did not participate in the negotiation or drafting of contract c member hospitals of association y could elect to participate in contract c and hospital a elected to do so page neither contract c as originally effective nor its first amendment provided for any reduction in the value of plan assets in the form of surrender fees investment liquidation fees or any other deferred expense charge amendment to contract c was adopted on date but by its terms was made retroactively effective to date for the first time since the inception of plan x amendment imposed a reduction on the value of plan x assets by applying surrender and investment liquidation fees surrender fee on all funds withdrawn from contract c by hospital a hospital a did not agree to the adoption of amendment nor did it participate in any negotiations leading to the alleged adoption of that amendment amendment was executed only by association y and company m subsequent to adoption of amendment hospital a elected to transfer all assets held under contract c to another investment medium to that end hospital a demanded that company m transfer all plan x assets to the new investment medium with no reduction for the surrender fee hospital a contended that company m had no contractual or other legal authority to impose the surrender fee because neither hospital a nor plan x's participants or beneficiaries had agreed to any such changes company m refused to transfer any of plan x's assets absent imposition of the surrender fee hospital a determined in the exercise of its fiduciary discretion that it was in the best interest of plan x to nonetheless transfer plan assets to another investment medium the transfer occurred on date consistent with its interpretation of amendment company m reduced the value of plan x assets transferred by approximately percent which it claimed as the surrender fee hospital a subsequently instituted a law suit on behaif of plan x against company m in ‘court n a court of competent jurisdiction the case was tried and the court determined that company m's imposition of the surrender fee violated contract c the court awarded to hospital a the full surrender fee withheld by company m along with compensation_for economic losses and attorney's_fees the award included interest which is required to be determined under specific provisions of the law of state s the case was appealed to the highest appellate court in state s and was upheld all appeals have now been exhausted and the time for appealing any additional issues in the case has expired hospital a intends to make a replacement payment to plan x consisting of the proceeds of its court n suit against company m plus interest to be allocated on a pro_rata basis to the accounts of participants and former participants who were adversely affected by the wrongfully imposed surrender fee the accounts of participants and former participants will be restored as of the date the surrender fee was imposed plus an interest adjustment from that date forward the interest adjustment to plan x accounts has two components interest for the period from the date the surrender fee was wrongfully imposed until the court ordered payment was actually made to hospital a will be determined in accordance with the provisions of the law of state s applicable to the payment made to hospital a interest for the period from the date payment was made to hospital a date until the replacement payment is made to plan x is being determined as follows on the day hospital a received the payment composed of the surrender fee and the interest adjustment it deposited the payment in account w at bank o interest is accruing on the deposit in accordance with the terms of account w until the deposit and the interest accrued to date are paid to plan x page based on the above you through your authorized representative request the following letter rulings that the replacement payment will not be considered a contribution or other payment that may adversely affect the qualified status of plan x under code sec_401 that the replacement payment will not be considered a contribution for purposes of code sec_415 that the allocation of the replacement payment to participants’ accounts will not cause participants their beneficiaries or their estates to currently recognize gross_income in the tax_year of the replacement pursuant to code sec_402 with respect to your ruling requests code sec_401 generally provides that the contributions or benefits provided under a qualified_retirement_plan may not discriminate in favor of highly compensated employees code sec_415 provides in part that a_trust which is part of a pension profit- sharing or stock_bonus_plan shall not constitute a qualified_trust under sec_401 a if a in the case of a defined_benefit_plan the plan provides for the payment of benefits with respect to a participant which exceeds the limitations of subsection b or b in the case of defined_contribution_plan contributions and other additions under the plan with respect to any participant for any taxable_year exceed the limitations of subsection c sec_1 b of the income_tax regulations provides that the term annual_additions includes employer contributions which are made under the plan sec_1 b further provides that the commissioner may in an appropriate case considering all of the facts and circumstances treat transactions between the plan and the employer or certain allocations to participants’ accounts as giving rise to annual_additions code sec_402 generally provides that amounts held in a_trust that is exempt from tax under code sec_501 and that is part of a plan that meets the qualification requirements of code sec_401 will not be taxable until such time as such amounts are actually distributed to distributees under such plan the service has analyzed the facts in this case and has arrived at the following conclusions the replacement payment has several components initially it is a substitute for contributions that wére wrongfully deducted from plan x participant accounts when the surrender fee was imposed insofar as the contributions were previously subject_to the requirements of code sec_401 and sec_415 the replacement payment as a substitution therefore will not be subject thereto secondly the replacement payment is a substitute for earnings on contributions made to plan x the earnings portion of the replacement payment has several components included is an earnings component that refers to earnings from the date the surrender fee was imposed on plan x until the date hospital a received the court ordered payment from company m a second eamings component refers to earnings computed page from the date hospital a received the court ordered payment from company m until the date the replacement payment will actually be paid to plan x all of the earnings components of the replacement payment are substitutes for earnings that plan accounts would have accrued during the relevant periods had the surrender fee not been imposed in this regard sec_415 would not be applicable to the portion of the payment representing such earnings and the fact that the payment is being allocated on a pro_rata basis would obviate concerns about sec_401 with respect to sec_402 of the code the allocation of the replacement payment to the accounts of participants and former participants is not taxable to participants and former participants until such allocation is distributed therefore with respect to your ruling requests the service concludes as follows that the replacement payment will not be considered a contribution or other payment that may adversely affect the qualified status of plan x under code sec_401 that the replacement payment will not be considered a contribution for purposes of code sec_415 that the allocation of the replacement payment to participants’ accounts will not cause participants their beneficiaries or their estates to currently recognize gross_income in the tax_year of the replacement pursuant to code sec_402 this ruling is based on the facts and representations contained therein no opinion is expressed as to the federal_income_tax consequences with respect to the transactions described above under any other provisions of the code additionally the representation made herein that the accounts of participants and former participants will be restored is like all factual representations made to the internal_revenue_service in applications for rulings and is subject_to verification on audit by service field personnel a copy of this letter has been sent to your authorized representative in accordance with the power_of_attorney on file in this office page if you have any questions please call at sincerely yours wy frances v sloan manager technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter notice of intention to disclose


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-166160-04 date september ----------------------------------------------------- ---------------------------- ------------------------------------------------------------------------------------------ ------------------------------------- ---------------------------------------------------------------- --------------------- ------------------- ----- ------- ------------------------------------------------------ ------------------------------------- ------------ ----------------- ----------------------------------------------------------------------------------------- legend taxpayer decedent trust ------------------------------------------------------------------------------------------------------------------ foundation charitable_trust date date x y location parcel state state court --------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------- state law dear --------------------- this is in response to your letter dated date and other correspondence submitted on your behalf by your authorized representative ---------------------------------------------- plr-166160-04 concerning the federal tax consequences of the proposed division of trust into trust and trust and the subsequent termination of trust the facts and representations submitted are summarized as follows decedent died on date survived by his wife taxpayer more than nine months have elapsed since date prior to his death decedent created trust which became irrevocable on date pursuant to the terms of trust upon the death of decedent the property of trust was held in a separate trust known as the marital trust for the benefit of taxpayer pursuant to article iv of trust taxpayer is the sole income_beneficiary of trust and is to receive all the net_income in quarterly or more frequent installments taxpayer has the unrestricted use and exclusive enjoyment during her lifetime of all real and personal tangible_property held by trust upon the death of taxpayer the remaining trust assets are to be distributed to foundation free and clear of trusts for its general charitable purposes taxpayer is the current successor trustee of trust the principal of trust currently includes certain tracts or parcels of improved and unimproved real_property of approximately x acres in location state in the trust or may disclaim any portion of such interest the disclaimer must be in writing and delivered to the trustees if the disclaimer is not a qualified_interest pursuant to sec_2518 then the disclaimed interest will be disposed of and the provisions of trust which relate to the disclaimed interest will be administered as though taxpayer died at the time the disclaimer was delivered to the trustee article vi of trust provides that taxpayer may at any time disclaim any interest prior to decedent’s death decedent formed foundation a state nonprofit corporation that is classified within the meaning of sec_170 sec_501 sec_2055 and sec_2522 taxpayer is the president chairman and sole director of foundation on date foundation as settlor established charitable_trust charitable_trust is a state charitable_trust that is described in sec_170 sec_501 sec_2055 and sec_2522 taxpayer and nine other individuals are the trustees of charitable_trust pursuant to article v paragraph h of the charitable_trust instrument taxpayer has the right to make the final_decision regarding all issues relating to the administration of charitable_trust including but not limited to all issues relating to the activities operations and programs described therein and the making of expenditures and distributions from charitable_trust pursuant to article viii paragraph b the trustees have the power to sell or otherwise dispose_of any property owned by charitable_trust however this power is limited with respect to certain property not relevant to this ruling form_706 filed for the decedent’s estate the executors elected under sec_2056 to treat the entire value of the property held by trust at the decedent’s death as passing from the decedent to the taxpayer for which an estate_tax_marital_deduction was allowed under sec_2056 on the united_states estate and generation-skipping_transfer_tax return plr-166160-04 on date foundation irrevocably assigned its remainder_interest in trust to charitable_trust consequently upon taxpayer’s death the remaining assets of trust will be distributed to charitable_trust taxpayer as the income_beneficiary of trust and as the trustee of charitable_trust proposes to file a petition with court to enter an order to divide trust into two separate and distinct successor trusts to be known as trust and trust each trust is to be administered governed and distributed in accordance with the terms and conditions of the original trust the court order to divide trust into trust and trust will be specifically conditioned upon a favorable tax ruling from the internal_revenue_service irs upon the division of trust into trust and trust an unimproved parcel of real_property parcel currently owned by trust consisting of y acres will be transferred to trust by conveyance and assignment trust will continue to hold all of the other assets currently owned by trust after the division of trust taxpayer proposes to disclaim her entire_interest in trust pursuant to the terms of article vi of trust accordingly trust will terminate as a result of taxpayer’s disclaimer of her entire_interest in trust and parcel will be transferred to charitable_trust trust into two or more separate trusts upon such terms and conditions and with such notice as it may direct state law provides that a court may for cause shown authorize the division of a you have requested the following rulings the division of trust into two separate and distinct trusts trust and trust will not adversely affect the availability of the estate_tax_marital_deduction by the decedent’s estate the election under sec_2056 with respect to trust nor the status of the property held by the two successor trusts as qualified_terminable_interest_property upon taxpayer’s disclaimer of her entire_interest in trust taxpayer will not be deemed to have made a transfer for gift_tax purposes of any property of trust under sec_2511 and sec_2519 and therefore there is no transfer by taxpayer of any property in trust by gift under sec_2501 as a result of taxpayer’s disclaimer of her entire_interest in trust upon taxpayer’s disclaimer of her entire_interest in trust any transfer for gift_tax purposes of any property in trust that would otherwise result under sec_2511 and sec_2519 is incomplete because of taxpayer’s position as trustee of charitable_trust and therefore there is no transfer of any property in trust by gift under sec_2501 as a result of taxpayer’s disclaimer of her entire_interest in trust plr-166160-04 the value of the property transferred from trust to charitable_trust as a result of taxpayer’s disclaimer of her entire_interest in trust will be included in taxpayer’s gross_estate under sec_2036 taxpayer will be entitled to a charitable estate_tax deduction under sec_2055 for the value of the property included in her gross_estate under sec_2036 as a result of the disclaimer of her entire_interest in trust the value of the property in trust will be included in taxpayer’s gross_estate under sec_2044 a for value of the property in trust included in her gross_estate under sec_2044 taxpayer will be entitled to a charitable estate_tax deduction under section the division of trust into trust and trust and the funding of trust and trust on a non-pro rata basis will not cause trust to realize gain_or_loss under sec_1001 neither taxpayer’s disclaimer of her entire_interest in trust the transfer of parcel in trust to charitable_trust nor the ownership of the property by charitable_trust of the property transferred from trust as a result of taxpayer’s disclaimer will result in an act of self-dealing under sec_4941 rulings sec_2501 provides that a tax is imposed on the transfer of property by gift by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete and subject_to the gift_tax when the donor has so parted with dominion and control_over the property transferred as to leave in the donor no power to change its disposition whether for the donor’s own benefit or for the benefit of another sec_25_2511-2 provides in part that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves sec_25_2511-2 provides that a donor is considered to have a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property such as a trustee plr-166160-04 sec_2519 provides that for gift and estate_tax purposes any disposition of all or part of a qualifying_income_interest_for_life in any property to which the section applies shall be treated as a transfer of all interests in the property other than the qualifying_income interest sec_2519 provides that the section applies to any property if a deduction was allowed with respect to the transfer of the property to the donor under sec_2056 sec_25_2519-1 provides that if a donee spouse makes a disposition of all or part of a qualifying_income_interest_for_life in any property for which a deduction was allowed under sec_2056 the donee spouse is treated for purposes of the estate and gift_tax as transferring all interests in property other than the qualifying_income interest sec_2056 provides that the value of the taxable_estate shall except as limited by sec_2056 be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property which passes or has passed_from_the_decedent_to_his_surviving_spouse under sec_2056 if an interest passing to the surviving_spouse will terminate no deduction shall be allowed with respect to such interest if after termination of the spouse’s interest an interest in the property passes or has passed for less than an adequate_and_full_consideration in money or money’s worth from the decedent to any person other than the surviving_spouse or the estate of the spouse sec_2056 provides that qualified_terminable_interest_property qtip for purposes of sec_2056 shall be treated as passing to the surviving_spouse and no part of the property shall be treated as passing to any person other than the surviving_spouse in general under sec_2056 qualified_terminable_interest_property is property that passes from the decedent in which the spouse receives a qualifying_income_interest_for_life defined in sec_2056 and with respect to which the executor makes an election to treat the property as qtip sec_2044 provides that the value of the gross_estate includes the value of any property described in sec_2044 in which the decedent had a qualifying_income_interest_for_life sec_2044 provides that sec_2044 applies to any property if a deduction was allowed with respect to the transfer of the property to the decedent under sec_2056 sec_2036 provides that the value of the gross_estate includes the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in the case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise under which the decedent has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the plr-166160-04 possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom in revrul_72_552 1972_2_cb_525 the decedent who was the president and director of a corporation organized under sec_501 transferred property to the corporation in his capacity as president and a director the decedent in conjunction with the other directors of the corporation had the power to direct the disposition of the corporation’s funds for charitable purposes the ruling held that due to the president’s right in conjunction with others to designate the entities that shall possess or enjoy the properties transferred to the corporation the property transferred by the president to the corporation was included in the president’s gross_estate at his death under sec_2036 sec_2055 provides in part that for estate_tax purposes the value of the taxable_estate shall be determined by deducting from the value of the gross_estate the amount of all bequests legacies devises or transfers to or for_the_use_of any corporation organized and operated exclusively for religious charitable educational and certain other purposes in this case upon decedent’s death the entire property held by trust was treated as qualified_terminable_interest_property and a marital estate_tax deduction under sec_2056 was allowed by the irs taxpayer is the sole income_beneficiary of trust and is to receive all the net_income in quarterly or more frequent installments under the proposed transaction the resultant successor trusts trust and trust will each be administered governed and distributed in accordance with the terms and conditions of the original trust accordingly the division of trust into two separate and distinct trusts trust and trust will not adversely affect the availability of the estate_tax_marital_deduction by the decedent’s estate the election under sec_2056 with respect to trust nor the status of the property held by the two successor trusts as qualified_terminable_interest_property as making a transfer of her interest in trust under sec_2511 and a disposition of her qualifying_income interest under sec_2519 such that taxpayer is also treated as making a transfer of the remainder_interest in the trust corpus consisting of parcel however in accordance with article vi of trust as a result of taxpayer’s disclaimer parcel will pass to charitable_trust taxpayer is a trustee of charitable_trust and under the terms of charitable_trust has the right to make the final_decision regarding all issues relating to the administration of charitable_trust including the power to direct expenditures and distributions for charitable purposes therefore taxpayer’s proposed disclaimer of her interest in trust constitutes an incomplete_gift for purposes of sec_2511 similarly taxpayer’s transfer under sec_2519 also constitutes an incomplete_gift see revrul_72_552 accordingly taxpayer will not be treated as making a completed_gift subject_to gift_tax under sec_2501 as a result of the disclaimer as a result of taxpayer’s disclaimer of her interest in trust taxpayer is treated we further conclude that assuming taxpayer retains her powers over the plr-166160-04 transferred property until her death the value of the property transferred from trust to charitable_trust as a result of taxpayer’s disclaimer will be included in taxpayer’s gross_estate under sec_2036 revrul_72_552 see also sec_25 g example and example taxpayer’s estate will be entitled to an estate_tax charitable deduction under sec_2055 for the value of the property included her gross_estate under sec_2036 as a result of her disclaimer of her entire_interest in trust sec_1001 provides that the gain from the sale_or_other_disposition of sec_61 provides that gross_income includes gains derived from dealings moreover upon taxpayer’s disclaimer of her entire_interest in trust taxpayer will not be deemed to have made a transfer for gift_tax purposes of any property of trust under sec_2511 and sec_2519 and therefore there is no transfer by taxpayer of any property in trust by gift under sec_2501 as a result of taxpayer’s disclaimer of her entire_interest in trust thus upon her death the value of the property in trust will be included in taxpayer’s gross_estate under sec_2044 taxpayer will be entitled to a charitable estate_tax deduction under sec_2055 for the value of the property in trust included in her gross_estate under sec_2044 ruling in property property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized of property shall be the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the transaction thus neither gain nor loss is realized on a partition see revrul_56_437 1956_2_cb_507 sec_1001 states that the amount_realized from the sale_or_other_disposition plr-166160-04 499_us_554 concerns the issue of whether a sale_or_exchange that has taken place results in the realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender’s interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution the court in cottage savings concluded that sec_1_1001-1 reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the internal_revenue_code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans cottage savings u s pincite consistent with the supreme court’s opinion in cottage savings to find that the interests of the beneficiaries of trust and trust will not differ materially from their interests in trust in the proposed transaction trust will be divided but the beneficiaries’ interests in the property will not change in_kind or extent and no interests will be created all of the provisions of trust will remain unchanged accordingly the proposed transaction will not result in a material difference in_kind or extent of the legal entitlements enjoyed by the beneficiaries and no gain_or_loss is recognized by the beneficiaries or the trusts on the partition for purposes of sec_1001 ruling in the present case provided that court approves the petition for division it is sec_4941 in part imposes a tax on each act of self-dealing between a private_foundation and a disqualified_person the tax is imposed on the disqualified_person and in certain situations a tax is also imposed on the foundation_manager s participating in the act or acts sec_4946 states in part that the term disqualified_person means with sec_4941 includes in the definition of self-dealing any direct or indirect transfer to or use for the benefit of a disqualified_person of the income or assets of a private_foundation respect to a private_foundation a person who is- a a substantial_contributor to the foundation b a foundation_manager within the meaning of subsection b c an owner of more than percent of-- i the total combined voting power of a corporation ii the profits interest of a partnership or iii the beneficial_interest of a_trust or unincorporated enterprise which is a substantial_contributor to the foundation d a plr-166160-04 member_of_the_family as defined in subsection d of any individual described in subparagraph a b or c sec_53_4941_d_-1 of the foundation and similar excise_taxes regulations provides in general that for purposes of sec_4941 the term self-dealing means any direct or indirect transaction described in sec_53_4941_d_-2 for purposes of this section it is immaterial whether the transaction results in a benefit or a detriment to the private_foundation sec_53_4941_d_-2 provides that an exception to the prohibited use of foundation assets applies where a disqualified_person receives only an incidental or tenuous benefit from the use by a private_foundation of its income or assets taxpayer is a disqualified_person within the meaning of sec_4946 and d taxpayer will receive no consideration in connection with the proposed transaction and will have no private use or ownership of parcel in trust after the transfer to charitable_trust all of the property in trust will be used exclusively by charitable_trust in furtherance of its charitable purposes and activities accordingly neither the taxpayer's disclaimer nor the transfer of parcel nor the ownership of parcel by charitable_trust will result in an act of self-dealing within the meaning of sec_4941 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 plr-166160-04 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 george l masnik branch chief branch passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service number release date index number -------------------------------------------------- -------------------------- ------------------------------- ------------------------------------------- ------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc ita b06 plr-144102-04 date date ---------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- ----------------------------- legend a ----------------------------------------- b ----------------------------------------- c ----------------------------------------- d ----------------------------------------- e ----------------------------------------- f g h j k l p ---------------- ------------ ---------------------------------- --------------------------- ----------------------------------- ---------------------------- ----------------------------- -------------------------------------------------- ------ ------- ------- -------------- plr-144102-04 ----------------------------------------- state date date date date date date date date dear --------------- ----------------------- -------------- ------- ------- -------------------------- facts this ruling is in reply to a request submitted by p requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations to file the required form sec_970 application to use lifo inventory_method on behalf of five of its affiliated entities a b c d and e this request is made in accordance with sec_301_9100-3 p and the electing entities a b c d and e collectively referred to as the companies are limited_liability companies organized under the laws of state each company uses the last-in_first-out lifo_method under sec_472 of the internal_revenue_code to value its inventory maintaining a lifo_pool for new cars and trucks additionally d has a lifo_pool for its parts inventory before date there were five subchapter_s_corporations organized under the laws of state with f as their majority shareholder during the summer of date to accommodate f’s interest in selling a portion of its interest in the five entities the five original s_corporations were merged into a single subchapter_s_corporation g after the combination their new car inventories and respective lifo pools were contributed as capital to p additionally certain unrelated assets were either sold or contributed as capital to p the contributed assets were then dropped down into five new llcs to enable each company to operate independently and maintain a separate and distinct relationship with its manufacturer plr-144102-04 when the assets were contributed to the companies the opening_inventory of each llc consisted of the transferred lifo inventory their lifo_inventories and the other assets were contributed in exchange for ownership interests under sec_721 of the internal_revenue_code resulting in recognition of neither gain nor loss after the asset transfers management retained supervisory responsibility over the same staff and locations that had existed before the exchange meanwhile f had reduced substantially its investment in the operations of the companies during the period in question h provided tax services for the companies preparing and reviewing their returns j who was experienced in both lifo and the industry in question was the engagement partner assigned to the companies’ account although company personnel assisted in preparing returns and supporting documentation j dealt with all technical issues including form sec_970 each of the original subchapter_s_corporations had elected the lifo inventory_method and had filed a form_970 that was approved by the internal_revenue_service because the prior entities were already on the lifo_method and the entity changes were primarily for reorganization p concluded that new form sec_970 would not be required for each of the newly formed llcs solely on account of the reorganization consequently the reorganized companies did not file form sec_970 after date with one exception at the time of the reorganization e did not account for its new car inventory under the lifo_method e’s original lifo election was terminated during the reorganization and e later filed a form_970 in date subsequent to the reorganization all tax returns filed by the companies identified that they were using the lifo inventory_method and that the method was consistently applied during date k was retained to perform unrelated tax services for one of p’s shareholders the work which was done on or about date was performed under separate agreement and did not apply to the companies during the engagement k’s personnel raised with p and j the issue of whether the reorganized companies were required to file form sec_970 at the time the companies’ tax preparer j was not convinced that new elections were required because of business disruptions that k incurred during date k was unable to pursue the matter further with p subsequently k’s personnel on the engagement departed the firm and the pertinent files and work papers were locked away in a storage_facility accordingly j’s advice to p that form sec_970 were not required coupled with k’s failure to pursue the issue with p resulted in no additional work being performed on the issue in date during the course of reviewing a proposed transaction that would merge two related llcs into a surviving entity named e p’s management again raised the question of whether a new form_970 might be required after further research p concluded that it might be necessary to file a new form_970 for the transaction in question and that form sec_970 potentially should have been filed after the date reorganization as well immediately after concluding this p contacted l its current plr-144102-04 provider of audit services for advice as to whether it would be necessary to file a request for extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 relief l affirmed p’s conclusion whereupon p has submitted this request for relief law and analysis sec_472 provides that a taxpayer may use the lifo_method in inventorying goods specified in an application to use such method filed at such time and in such manner as the secretary may prescribe sec_1_472-3 provides that the lifo inventory_method may be adopted and used only if the taxpayer files with its income_tax return for the tax_year as of the close of which the method is first to be used a statement of its election to use such inventory_method the statement is to be made on form_970 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the code except subtitles e g h and i provided that the taxpayer acted reasonably and in good_faith and provided that granting relief will not prejudice the interests of the government sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin an election is defined to include a request to adopt change or retain an accounting_method sec_301_9100-2 sets forth rules governing automatic extensions for regulatory elections if the provisions of sec_301_9100-2 do not apply to a taxpayer’s situation the provisions of sec_301_9100-3 may apply instead sec_301_9100-3 sets forth the standards that the commissioner will use in determining whether to grant an extension of time to make a regulatory election it also sets forth information and representations that must be furnished by the taxpayer to enable the internal_revenue_service to determine whether the taxpayer has satisfied these standards the standards to be applied in this case are whether the taxpayer acted reasonably and in good_faith and whether granting relief would prejudice the interests of the government under sec_301_9100-3 a taxpayer applying for relief for failure to make an election before the failure is discovered by the service ordinarily will be deemed to have acted reasonably and in good_faith however pursuant to sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested or if the taxpayer was informed in all material respects of the required election and related tax plr-144102-04 consequences but chose not to file the election furthermore a taxpayer ordinarily will not be considered to have acted reasonably and in good_faith if the taxpayer uses hindsight in requesting relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all tax years affected by the regulatory election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money likewise if the tax consequences of more than one taxpayer are affected by the election the government’s interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made further sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the tax_year in which the regulatory election should have been made or any_tax years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under sec_301_9100-3 under the facts represented by p the companies except for e have reported taxes as if they had been on lifo since date the date of their reorganization e has reported its taxes as if it had been on lifo since date the date that it filed form_970 therefore the companies will not by virtue of the election have a lower tax_liability than they would have had if the election had been timely accordingly the government’s interests are not prejudiced under sec_301_9100-3 the information and representations furnished by p establish that it has acted reasonably and in good_faith in this request furthermore granting an extension will not prejudice the interests of the government accordingly an extension of time is hereby granted to file the necessary form sec_970 for the companies for the tax_year ended date this extension shall be for a period of days from the date of this ruling please attach a copy of this ruling to the form sec_970 when they are filed no opinion is expressed as to the application of any other provisions of the code or regulations that may be applicable to the transaction this ruling addresses only the request to extend the time period for filing form sec_970 and does not directly or indirectly approve the overall use of the lifo methods used by the companies such a determination is to be made by the field in connection with an examination of the companies’ federal_income_tax returns this ruling is directed only to the companies in whose behalf p requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office copies of this letter are being sent to p and to p’s first designated representative plr-144102-04 cc sincerely robert m brown associate chief_counsel income_tax accounting by___________________________ jeffery g mitchell branch chief branch income_tax accounting


internal_revenue_service p o box cincinnati oh release number release date date date department of the treasury employer_identification_number contact person - 1d number contact telephone number legend uil dollar_figure - z z x n u n dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that you were recognized as exempt from federal_income_tax under sec_501 of the code and that it is classified as a private_foundation as defined in sec_509 your purpose is to award scholarships for college to high school students these grants provide additional funding to help students with tuition at a post-secondary school the criteria to determine eligibility for the grants are e e the applicant must be a high school senior attending n high school senior must be enrolled in college or university prior to receiving the scholarship recipients are selected based on the eligibility criteria listed above in their grant request the applicant must detail their financial need academic accolades submit a personal essay community service gpa standardized test scores and a personal interview with m's selection committee annual scholarships will be awarded based on merit and financial need criteria includes prior academic performance performance on tests designed to measure ability and aptitude for college work recommendations from instructors financial need and personal interviews amounts will be for either x or y and the maximum of all scholarships issued per year will be z all scholarships will be a one time distribution and are not renewable applicant must demonstrate confirmation of enrollment to receive the scholarship potential recipients must submit a scholarship application form and provide supporting documentation to be considered for a grant a scholarship selection committee will first screen the applications to determine whether the applicant meets the grant criteria and then will conduct personal interviews the selection committee is made up of individuals from n as part of the scholarship program relatives of the scholarship committee are not eligible to vote on said scholarship you will maintain records and case histories of all grants and the payments from you will be made directly to the school in which the recipient is enrolled sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process ii such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it section the code provides that it may not be used or cited as a precedent of you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely yours lois lerner director exempt_organizations enclosure notice