PLR 200514006: Changing assigned share of claims preserves earlier income ruling

Plain-English summary

A taxpayer previously received a ruling that proceeds from an assigned 50 percent interest in several claims would not be included in its income if the assignment terms were met. It then asked whether using a different, redacted percentage, to be specified when the assignment was executed, would change that result. The IRS ruled that the change would have no adverse effect on the earlier ruling, which remained in force. The supplemental letter incorporates the earlier ruling's facts, representations, and caveats by reference; it does not restate them. The outcome concerns only proceeds attributable to the interest actually transferred under the assignment.

Ruling snapshot

• Question: Would changing the assigned percentage of the identified claims disturb the prior income ruling?
• Outcome: Approved: the earlier ruling remained effective for the revised assignment.
• Key authorities: IRC § 61; LTR 200445002.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200514006
Release Date: 4/8/2005
Index Number: 61.30-03, 61.28-00, 61.28-02

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Person To Contact:
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------------------------, ID No. -------------
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Telephone Number:
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In Re: Refer Reply To:
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CC:ITA:B4 – PLR-157108-04
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Date: December 15, 2004
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X = ---------------------------------------------------- B = ----------------------- E = ---------------------------------------------------------------------------------------------------
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F
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G = ---------------------------------------------------------------------------------------------------
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H = ---------------------------------------------------------------------------------------------------
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x% = ------------------

Dear ------------------:

This letter responds to your request for a letter ruling supplementing LTR 200445002 dated July 20, 2004 (Prior Ruling). The legend, abbreviations, facts, proposed transaction, representations, and caveats appearing in Prior Ruling are incorporated by reference.

Specifically, you have requested that certain changes in the proposed assignment will not adversely affect the conclusion in Prior Ruling. In Prior Ruling, the Internal Revenue Service concluded that judgment or settlement proceeds attributable to a 50% interest of claims E, F, G, and H (the Identified Claims) that will be assigned to B under the Assignment will not be includible in X’s income provided that the terms of the Assignment are met. You are now requesting a ruling that the transfer of an x% undivided interest in the Identified Claims, which percentage will be specified at the time of execution of the Assignment, will not adversely affect the conclusion in Prior Ruling. Thus, if X transfers to B an x% undivided interest in the Identified Claims and X specifies that percentage interest at the time of execution of the Assignment, then the proceeds of the Identified Claims so transferred will not be included in X’s income.

PLR-157108-04
2

Based solely on the information and representations submitted in your letter dated -------
-----------------------, we conclude that the change in the Assignment from a transfer of a 50% undivided interest in the Identified Claims to a transfer of an x% undivided interest in such claims, which percentage interest will be specified at the time of execution of Assignment, will have no adverse effect on Prior Ruling, which retains full force and effect.

CAVEATS

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.

Taxpayer should attach a copy of this letter and a copy of Prior Ruling to any tax return to which it is relevant. We enclose a copy of the letter for this purpose. Also enclosed is a copy of the letter showing the deletions proposed to be made when it is disclosed under § 6110 of the Internal Revenue Code.

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.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney and Declaration of Representative on file in this office, a copy of this letter is being sent to your authorized representative.

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Sincerely,

Michael J. Montemurro
Senior Technician Reviewer
Office of Chief Counsel
(Income Tax & Accounting)

Enclosures (2)