Opinion ID: 2383573
Heading Depth: 1
Heading Rank: 6

Heading: The IRS Private Letter Ruling

Text: In May 1991, the Trustees sought a private letter ruling from the Internal Revenue Service on whether the September 1990 distributions were deemed to carry out income for income tax purposes to the beneficiaries. In their request the Trustees adopted the analysis set forth in the February 15th letter of Richards' counsel and expressed their belief that the 1990 distributions did not carry out income to the beneficiaries for income tax purposes. In September 1991, the Suffolk County, New York Surrogate's Court approved the Agreement and Amendment and admitted the will to probate subject to those documents. Later in the fall of 1991, partly in reliance upon oral assurances from local IRS officials that a favorable ruling would be forthcoming, the Trustees filed 1990 fiduciary income tax returns that reflected the position advocated in the ruling request (i.e., that the 1990 distributions carried out no income) and paid the resulting state and federal income taxes out of the trust. By letter ruling dated January 31, 1992, the IRS unexpectedly rejected the position of the Trustees and its own earlier letter rulings and instead held that the 1990 distributions in fact carried out income to the beneficiaries for income tax purposes. The IRS ruling went on explicitly to provide: Except as specifically set forth above, we express no opinion concerning the federal tax consequences of the above-described facts. Thus, the IRS ruling made no determination on questions relating to how the income distributed in 1990, or the tax liabilities associated with that income, should be allocated among the beneficiaries. Trustees' counsel specifically sought guidance from the IRS with respect to these questions. The IRS declined to address them, however, indicating only that it wished to reverse the result of its earlier private letter rulings that supported the position that the 1990 distributions carried out no income for tax purposes.