IRS Written Determinations
Free IRS private letter rulings, technical advice memoranda, and Chief Counsel advice with plain-English summaries and the official IRS release on every page.
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Taxpayer receives more time for success-based fee election
A taxpayer incurred success-based fees when acquiring a corporation and reported them using the Rev. Proc. 2011-29 safe harbor. Its timely return deducted 70 percent and capitalized 30 percent, but th…
Multiple unit classes and IRA owners receive S corporation relief
An LLC taxed as an S corporation amended its operating agreement to create preferred and several common-unit classes with different distribution or liquidation rights. It then issued some preferred un…
Stock unification uses shareholder-level net voting shifts
A corporation planned to eliminate distinctions between high-vote and low-vote common stock immediately before spinning off a controlled subsidiary. The unification would shift more than 50 percent of…
Preferred stock does not end consolidated group status
A foreign holding company owned all of a domestic parent's common stock, while the parent also had publicly traded preferred stock with dividend, liquidation, redemption, and limited voting rights. Th…
Foreign entity receives late disregarded-entity election relief
A foreign eligible entity intended to elect disregarded-entity status but failed to file Form 8832 on time. The IRS found that it met the standards for discretionary relief and granted 120 days to fil…
Foreign entity may file a late disregarded-entity election
A foreign eligible entity intended to elect disregarded-entity status but failed to file Form 8832 on time. The IRS found that it met the standards for discretionary relief and granted 120 days to fil…
LLC receives 120 days for a late section 754 election
Ownership interests in an LLC were transferred during a tax year, but the LLC's adviser did not tell it that an IRC § 754 election was available. The LLC therefore missed the deadline to elect basis a…
Consolidated group may make a late bonus-depreciation election
An affiliated group did not claim additional first-year depreciation for any class of qualified property on its timely consolidated return. Its in-house tax team nevertheless failed to attach the stat…
Deemed stock distributions avoid section 732(f) basis reduction
A consolidated corporate group planned to simplify two partnership LLCs that held property subject to IRC § 704(c). One LLC would elect corporate status, causing a deemed contribution of its assets to…
Unknown IRA closure qualifies for rollover waiver
A bank closed a taxpayer's IRA without his knowledge and transferred the funds to a state division. The taxpayer learned of the closure months later, promptly recovered the funds, and redeposited part…
Adviser error qualifies illiquid IRA investment for rollover waiver
A financial institution decided that an illiquid limited-partnership interest could no longer be held in a taxpayer's IRA. It notified the taxpayer's adviser, but the adviser failed to warn the taxpay…
Scholarship procedures receive advance approval
A non-exempt charitable trust sought advance approval for scholarships to graduates of a specified high school who would attend agricultural colleges. Applicants would be evaluated on activities, serv…
Revised artistic research grant procedures receive approval
A private operating foundation sought advance approval for revisions to an artistic and cultural research grant program whose procedures the IRS had previously approved. The program would fund interna…
Family control and private benefit defeat exemption
An unincorporated association sought recognition as tax-exempt under IRC § 501(c)(3) for housing and services for people with developmental disabilities. Its bylaws described two related individuals a…
Ex parte rules depend on whether the Appeals case is docketed
Chief Counsel addressed whether Appeals must follow ex parte communication rules while coordinating a settlement with Area Counsel because a related case was in Counsel jurisdiction. If the proposed A…
Preparing a substitute return from IRS records is not an examination
Chief Counsel advised that preparing an IRC § 6020(b) substitute return solely from information returns and other material already held by the IRS did not count as an examination for purposes of IRC §…
Appeals cannot allow a refund after the suit period expires
Chief Counsel advised that Appeals could not allow a refund claim after the two-year period for filing a refund suit had expired. A different Chief Counsel Advice cited by the taxpayer did not address…
Refundable credits produce a $1,000 penalty underpayment
Chief Counsel confirmed that a penalty calculator correctly produced a $1,000 underpayment for purposes of the IRC § 6662 accuracy-related penalty. Under the regulation's formula, refundable credits r…
Valuation misstatement penalties require a value claimed on a return
Taxpayers overvalued property, but did not claim that property value on a return. The resulting underpayment instead arose from disallowed interest expense deductions. Chief Counsel advised that, unde…
Controlled-substance businesses use pre-1986 inventory rules for cost of goods sold
Chief Counsel explained how a business trafficking in a Schedule I or Schedule II controlled substance determines cost of goods sold while IRC § 280E disallows its business deductions and credits. The…
Real estate agents may be property brokers, but mortgage brokers are not
Chief Counsel interpreted “real property brokerage” for the real estate professional rules in IRC § 469(c)(7)(C). A real estate agent who brings together buyers and sellers of real property may conduc…
Estate receives 120 days to make the 2010 carryover basis election
The executor of an estate for a decedent who died in 2010 sought additional time to file Form 8939. That form would elect the carryover basis rules of IRC § 1022 instead of the estate tax regime and a…
Foreign life insurer may use home-country reserves to measure income
A domestic parent and its controlled foreign life insurer asked to use specified home-country statement reserves to measure insurance income under IRC § 954(i)(4)(B)(ii). The foreign insurer was licen…
Corporate separation steps receive four discrete tax rulings
A publicly traded parent planned a complex separation of one business through domestic transfers, foreign transfers, a Country B restructuring, a contribution to a controlled corporation, borrowing, a…
Foreign insurer may use home-country CRVM and annuity reserves
A domestic parent and its controlled foreign life insurer asked to use specified home-country statement reserves to measure insurance income under IRC § 954(i)(4)(B)(ii). The insurer was licensed and …
Public fund investments do not make contract holders owners of fund shares
Three investment funds offered their shares exclusively to life insurance company separate accounts that funded variable life and annuity contracts. The funds expected to invest in other regulated inv…
Pooled fund and trust interests qualify as registered-form obligations
An investment-fund sponsor planned a master partnership and a disregarded statutory trust that would hold beneficial interests in distressed commercial mortgage loans. The mortgage loans themselves we…
Taxpayer receives 60 days to complete success-fee safe harbor election
A taxpayer incurred success-based fees in acquiring a corporation and timely deducted 70 percent while capitalizing 30 percent, consistent with the safe harbor in Revenue Procedure 2011-29. Its CPA pr…
Taxpayer may reelect the foreign earned income exclusion
A U.S. citizen living abroad had elected the foreign earned income exclusion and later revoked that election. Before the normal waiting period for reelection expired, the taxpayer changed employers an…
Foreign entity receives 120 days for late partnership election
A foreign eligible entity intended to be classified as a partnership for federal tax purposes from a specified date, but inadvertently failed to file Form 8832 on time. The IRS found that the entity s…
Multiemployer plan receives five-year funding amortization extension
A multiemployer plan requested a five-year extension for amortizing specified unfunded liabilities. Its actuary certified that the plan otherwise would have a funding deficiency in the current or one …
Multiemployer plan receives five-year funding amortization extension
A multiemployer plan requested a five-year extension for amortizing specified unfunded liabilities. Its actuary certified that the plan otherwise would have a funding deficiency in the current or one …
Multiemployer plan receives five-year funding amortization extension
A multiemployer plan requested a five-year extension for amortizing specified unfunded liabilities. Its actuary certified that the plan otherwise would have a funding deficiency in the current or one …
Multiemployer plan receives five-year funding amortization extension
A multiemployer plan requested a five-year extension for amortizing specified unfunded liabilities. Its actuary certified that the plan otherwise would have a funding deficiency in the current or one …
Financial institution error supports IRA rollover waiver
A taxpayer withdrew funds from one IRA and instructed another financial institution to deposit them into a second IRA. The institution instead placed the money in a non-IRA account, and the error was …
Agent error supports waiver for self-directed IRA rollover
A taxpayer asked an agent to roll two IRA funds into a self-directed IRA for investment in a company. The agent instead prepared a form making the distribution checks payable to the company, which was…
See-through trust may divide IRA into five inherited beneficiary IRAs
A decedent who had already reached the required beginning age named a revocable trust as the beneficiary of an IRA, and the trust became irrevocable at death. After other obligations were satisfied fr…
Foundation may set aside construction funds for educational facility
A private foundation requested approval to set aside funds for the initial construction phase of an educational and cultural facility. Its wholly owned disregarded entity would construct the facility,…
Foundation may set aside funds for girls' dormitory renovation
A private foundation requested approval to set aside funds to restore and expand a dormitory complex used to shelter refugees and migrant children. The project would bring the building into compliance…
Foundation loses exemption for substantial personal expenditures
The IRS revoked a private foundation's tax-exempt status under IRC § 501(c)(3) after an examination found that substantial foundation assets paid personal expenses of its officers. The examination des…
Inactive social welfare organization loses exemption
The IRS proposed to revoke a social welfare organization's tax exemption under IRC § 501(c)(4). The organization had been formed to raise money, build an assembly hall for community programs, transfer…
Taxpayer denied abatement of excess benefit tax
A limited liability company asked the IRS to abate the first-tier excise tax on an automatic excess benefit transaction under IRC § 4958. A former foundation director owned more than 35 percent of the…
University may operate software business through taxable subsidiary
A tax-exempt university created a wholly owned for-profit subsidiary to develop and license software used for competency-based education. The subsidiary would have separate management, facilities, rec…
Credit counseling organization loses exemption
The IRS revoked a credit counseling organization's exemption under IRC § 501(c)(3). The organization enrolled clients in debt management plans and received its income from those plans, but it did not …
Online retail marketplace denied exemption
The IRS denied tax-exempt status under IRC § 501(c)(3) to an organization proposing to operate an online retail marketplace. Customers would select a charity, school, or church to receive the profit f…
Use partnership name from audited year's return on consent
Chief Counsel advised that a TEFRA proceeding operates for the partners, not the partnership, for the year of the partnership return. The partnership name shown on that return and the related agreemen…
Confirm eligible member-manager before identifying tax matters partner
Chief Counsel advised that the LLC's tax matters partner is the member-manager designated under the applicable regulations. The available facts did not establish which of two members met that definiti…
No information-return penalties when withholding was reported correctly
Chief Counsel advised that penalties under IRC §§ 6721 and 6722 generally could apply to errors on Forms 1042-S. Here, however, the withholding agent correctly reported in Box 7 the amounts it actuall…
Sochurek test still governs pre-2005 Virgin Islands residency claims
Chief Counsel advised that the 11-factor Sochurek facts-and-circumstances test remained the proper standard for evaluating bona fide U.S. Virgin Islands residence for tax years 2002 through 2004. The …
Captive reimbursement arrangement requires facts review and accounting adjustment
Chief Counsel considered a captive insurer's deductible reimbursement policy issued to its parent. Whether the captive could report premium income and related deductions depended on the arrangement's …
Storage company receives coordinated REIT conversion rulings
A publicly traded storage company requested 12 rulings for its planned conversion to a real estate investment trust. The IRS treated its custom, permanently installed steel racking structures as real …
Foreign reinsurer may use regulated statement reserves
A domestic parent asked whether its controlled foreign reinsurance subsidiary could use reserves reported under its home-country insurance rules to measure income under IRC § 954(i). The subsidiary an…
Consolidated group receives more time to waive loss carryback
A consolidated corporate group intended to elect to waive the entire carryback period for a consolidated net operating loss but failed to file a valid election on time. The IRS found that the parent r…
Parent receives more time for foreign target stock election
A consolidated group's parent intended to make an IRC § 338(g) election for its purchase of a foreign target's stock but failed to file the election on time. The IRS found that the parent reasonably r…
Retained spin-off shares do not show tax-avoidance purpose
A public company planned to spin off a controlled subsidiary while temporarily retaining some of the subsidiary's shares. The retained shares would support deferred director compensation and employee …
Couple may revoke mistaken election out of installment method
A married couple sold an asset for 30 percent cash and a promissory note payable over 12 years. Their accountant miscalculated the first year's taxable income and reported the entire gain immediately,…
S corporation receives relief for missing trust election
An S corporation shareholder died and the shareholder's estate transferred company stock to a trust under the will. After the trust's two-year period as an eligible shareholder expired, the trustee fa…
Estate receives more time to elect alternate valuation
An estate filed its federal estate tax return after the regular due date but within one year after that date, including extensions. The executor then requested additional time to elect the alternate v…
Refined coal process and testing qualify for production credit rules
A company leased and operated a facility that applied two chemical reagents to coal to reduce nitrogen oxide and mercury emissions. The IRS ruled that coal produced through the described process could…
Utility upgrade reimbursements are not capital contributions
An electric utility upgraded its transmission system to accommodate a new transmission project. A municipal power entity ultimately paid the upgrade costs under agreements that gave it transmission ca…
What these documents are
- Private letter rulings (PLRs): A taxpayer asked the IRS to rule on a planned transaction before doing it. The ruling shows exactly how the IRS applied the Code to those facts.
- Technical advice memoranda (TAMs): The IRS National Office answering a question raised during an audit or other proceeding.
- Chief Counsel advice (CCAs): IRS lawyers advising their own field staff on how to apply the law.
- Determination letters: Rulings on exempt-organization matters, such as whether an organization qualifies under § 501(c)(3) or a foundation's grant procedures pass § 4945.
- Not precedent, still useful: Under 26 U.S.C. § 6110(k)(3) none of these can be cited as precedent. They remain the best public window into how the IRS actually rules on facts like yours, and practitioners read them for exactly that.