Failed charitable remainder trust owes tax before beneficiary payout

Plain-English summary

A trust intended as a charitable remainder unitrust paid beneficiaries more than its net-income limitation allowed by improperly treating capital gains as income. The IRS concluded that the trust failed to operate exclusively as a charitable remainder trust from its creation and could not be respected as one. It would not rule that a state court order declaring the trust void from inception produced no federal tax consequences because that request raised a rescission issue. The trust nevertheless remained a split-interest trust treated as a private foundation for specified excise taxes because charitable deductions had been claimed and allowed. A court-ordered distribution of all assets to the income beneficiary before terminating private foundation status would create self-dealing and taxable-expenditure taxes and could trigger section 507 termination tax. The trust must file taxable trust returns for open years and may avoid the chapter 42 distribution taxes only by completing the section 507 termination process before paying out its assets.

Ruling snapshot

• Question: What tax consequences follow from the failed CRUT's proposed court-ordered termination and beneficiary distribution?
• Outcome: mixed, CRUT status failed, the rescission ruling was declined, and distribution before private foundation termination would trigger taxes
• Key authorities: IRC §§ 507, 642, 664, 4941, 4945, and 4947(a)(2); Treas. Reg. §§ 1.507-1 and 1.664-1

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201714002 Third Party Communication: None
Release Date: 4/7/2017 Date of Communication: Not Applicable
Index Number: 642.03-00, 507.00-00,
4941.04-00, 4945.05-00, Person To Contact:
4947.02-00 -------------------------, ID No. -----------------
-----------------------------------------------------
-------------------------------- Telephone Number:
------------------------------------------------------------ ----------------------

• Refer Reply To:
  ----------------------------- CC:PSI:3
  ------------------------------- PLR-107392-14
  Date:
  December 21, 2016

LEGEND

Trust = -----------------------------------------------------------------

A = -------------------------------------------

B = ------------------------------------------

C = -----------------------

D = --------------------

E = --------------------

X = ---------------------------------------------------------------------------------------------------

State = ---------------

Court = ----------------------------------------------------------

Year1 = -------

Year2 = -------

Year3 = -------

Year4 = -------

PLR-107392-14 2

Year5 = -------

Year6 = -------

Date1 = --------------------

Date2 = ----------------------

Date3 = ------------------

Date4 = --------------------

Date5 = --------------------

Date6 = ------------------------

N1 = ------------

N2 = ----

N3 = --

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

  This letter responds to a letter dated February 18, 2014, and subsequent

correspondence, submitted on behalf of Trust by Trust’s authorized representative,
requesting a ruling under § 664 and other provisions of the Internal Revenue Code
(“Code”).

FACTS

   The information submitted states that Trust was formed by A under an

agreement dated Date1, with A and B serving as co-trustees of Trust. At the time Trust
was established, A was a resident of State. The information submitted states that Trust
was intended to qualify as a Charitable Remainder Unitrust (“CRUT”) under § 664 of the
Code. Trust was funded by A on Date2. X was the initial charitable remainder
beneficiary of Trust. A was the initial unitrust recipient of Trust, until A’s death on
Date3.

   In Year1, A had a net worth in excess of $N1. A’s assets consisted primarily of

low basis, non-dividend paying stocks. A and B engaged C to provide financial and
estate planning advice. C recommended that A and B engage D, an attorney licensed

PLR-107392-14 3

to practice law in State, for legal advice on estate planning and charitable giving. C and
D ultimately recommended that A create Trust as a charitable remainder trust, and to
transfer certain low-basis capital assets to Trust in order to avoid the imposition of
capital gain taxes on the subsequent sale of those assets by Trust. A and B were
advised that this arrangement would allow Trust to sell the stock in the future without
incurring capital gains taxes, and that Trust would serve both as an estate planning
vehicle and a charitable giving vehicle. According to the submission, D represented to
A and B that there would be no gift taxes due upon creation of Trust because there
would be no completed gift to the successor recipients at that time. To achieve this
result, A would retain the right to change the successor recipients. However, when D
drafted the trust agreement for Trust, D failed to reserve A’s right to change the
successor recipients. As a result, the interests of the successor recipients vested at the
time the trust agreement was executed, and the gift to the successor recipients became
complete causing gift tax to be due and owing. However, when gift tax returns were
prepared by A’s accountant for Year1, the accountant relied on the advice given by D
that no gift tax was owed as a result of the property transfers to the Trust.

    Under the trust agreement for Trust, Trust was required to make quarterly

payments to A for the remainder of A’s life or for a term of twenty years, whichever was
shorter. If A died prior to the expiration of the twenty-year term, the payments would be
made for the balance of the twenty-year term to the successor unitrust recipient, B, or to
B’s designated successor if B died prior to the expiration of the term. At the expiration
of the twenty-year term, the remaining assets of Trust would be distributed to X or to a
subsequently-named eligible entity.

   According to the submission, C allegedly represented to A and B that Trust’s

assets would generate a N2% annual return if invested as C recommended. C
allegedly further told A and B that A would receive a guaranteed N3% return on the fair
market value of Trust assets during A’s lifetime or during the 20-year term of Trust.
Trust assets were invested in annuities and insurance products that C was licensed to
sell. According to the submission, these types of investments made it difficult for Trust
to generate an N3% annual return, and Trust never achieved an N3% return without
including capital gains which, under the laws of State, were allocable to principal, not
income.

    At the time the trust agreement for Trust was drafted, C and D allegedly made a

number of misleading and legally erroneous representations regarding the operation of
Trust, including the promise that A would receive a guaranteed N3% annual return on
the net fair market value of Trust assets. According to the submission, A and B
executed the trust agreement, relying upon the advice and representations made to
them by C and D. In fact, the trust agreement of Trust, as drafted, provided for an N3%
annual payout, except that the annual unitrust payment was limited to Trust’s annual net
income and included a “net income make-up” provision.

PLR-107392-14 4

   The trust agreement of Trust provided that the definition of income for this

purpose is “as defined in § 643(b) of the Internal Revenue Code of 1986 and regulations
thereunder.” During the years that the unitrust amount was payable to A before A’s
death, Trust never generated sufficient income, without including capital gain, to meet
the N3% payout. Nevertheless, based on the erroneous advice provided by C and D,
the trustees of Trust included capital gain in trust income, and the trustees paid the
N3% of the net fair market value of Trust assets to A for Year1 and Year3 (including a
make-up amount in Year3 for a shortfall in Year2). Accordingly, the trustees
erroneously determined the amount to be distributed to the unitrust beneficiary in Year1,
Year2 and Year3 (and also in subsequent years) by improperly including capital gain in
the calculation of trust income.

   According to the submission, C and D also incorrectly advised A and B that the

assets of Trust would not be includible in A’s estate for estate tax purposes. This
advice was incorrect since A retained an income interest in Trust as the unitrust
recipient. However, based on this erroneous advice, A added additional assets to Trust
in Year2 and Year3 in an attempt to further reduce the assets in A’s taxable estate.
According to the submission, A claimed charitable deductions on A’s individual federal
income tax returns for Year1, Year2 and Year3 for a portion of the fair market value of
the property contributed to Trust by A in each such tax year, respectively, pursuant to
§ 170(a).

   After A’s death on Date3, B became the successor unitrust recipient of Trust. In

addition, B became the sole trustee of Trust. In Year4, B petitioned Court to reform the
trust agreement of Trust. X, the named charitable beneficiary of Trust, along with the
State Attorney General, objected to the reformation. B’s petition was dismissed. In
Year5, B petitioned Court a second time to reform Trust. Both X and State Attorney
General again objected to the reformation. B’s second petition was dismissed without
prejudice. On Date4, B filed a third petition with Court to either reform or terminate
Trust. In a letter dated Date5, the State Attorney General again objected to B’s petition.
X did not appear or make an objection to B’s third petition.

    On Date6, Court issued a declaration and order determining that Trust was void

ab initio. Court’s ruling in this regard is contingent on Trust receiving a favorable ruling
from the Internal Revenue Service (“Service”) that provides that such declaration would
not result in additional federal income tax consequences. In the event that Trust does
not receive a favorable ruling from the Service, the trustee shall file a statement to that
effect with Court, and upon such filing Trust will be declared to be terminated and, after
payment of all amounts due and owing the Service and State Department of Revenue
from the assets of Trust, Trust will be distributed to its unitrust income recipient. B died
after the date this court order was issued and after this ruling request was filed. B’s
surviving spouse, E, is the successor trustee and unitrust income recipient.

PLR-107392-14 5

   Trust seeks the following rulings: 1) Trust should not be respected as a CRUT

because it did not function exclusively as a charitable remainder trust throughout its
existence; 2) Court’s determination that Trust was void ab initio will not result in any
additional federal tax; 3) Trust is described in § 4947(a)(2); and 4) a judicial termination
of Trust will not result in any additional federal income tax, chapter 42 excise tax, or
other federal tax owed by the Trust or any disqualified person or foundation manager
with respect to the Trust.

LAW AND ANALYSIS

   Section 664(c)(1) provides that a charitable remainder annuity trust and a

charitable remainder unitrust shall, for any taxable year, not be subject to any tax
imposed by this subtitle.

     Section 664(d)(2)(A) provides that, for purposes of § 664, a charitable remainder

unitrust is a trust from which a fixed percentage (which is not less than 5% nor more
than 50%) of the net fair market value of its assets, valued annually, is to be paid, not
less often than annually, to one or more persons (at least one of which is not an
organization described in § 170 and, in the case of individuals, only to an individual who
is living at the time of the creation of the trust) for a term of years (not in excess of 20
years) or for the life or lives of such individual or individuals.

   Section 664(d)(2)(B) provides that, for purposes of § 664, a charitable remainder

unitrust is a trust from which no amount other than the payments described in
§ 664(d)(2)(A) and other than gratuitous transfers described in § 664(d)(2)(C) may be
paid to or for the use of any person other than an organization described in § 170(c).

    Section 664(d)(3) provides that, notwithstanding the provisions of § 664(d)(2)(A)

and (B), the trust instrument may provide that the trustee shall pay the income
beneficiary for any year --
(A) the amount of trust income, if such amount is less than the amount required to be
distributed under § 664(d)(2)(A), and
(B) any amount of the trust income which is in excess of the amount required to be
distributed under § 664(d)(2)(A), to the extent that (by reason of § 664(d)(3)(A)) the
aggregate of the amounts paid in prior years was less than the aggregate of such
required amounts.

  Section 1.664-1(a)(4) provides, in part, that in order for a trust to be a charitable

remainder trust, it must meet the definition of and function exclusively as a charitable
remainder trust from the creation of the trust.

  In Estate of Atkinson v. Commissioner, 115 T.C. 26 (2000) aff’d 309 F.3d 1290

th
(11 Cir. 2002), the Tax Court determined that a charitable remainder annuity trust
never qualified as a charitable remainder trust due to irregularities in the administration

PLR-107392-14 6

of the trust that violated the requirements of charitable remainder trusts, and that the
operational failures of the trust could not be corrected by a reformation of the trust
document. The trust agreement provided for a 5% annuity amount to be paid to the
decedent during her life. At death, the annuity was to be distributed among various
named individuals, but only if the beneficiaries paid their share of federal estate and
state death taxes resulting from the inclusion of trust assets in decedent’s estate. No
annuity payments were actually made to the decedent during her lifetime. At trial, the
trustee testified that he remitted checks to the decedent but that they were not cashed.
There was, however, no record of canceled checks nor were copies of such checks
presented in evidence to support the alleged payments. The Tax Court determined that
the trust did not qualify as a valid charitable remainder trust because no payments were
made to the lifetime beneficiary, so operationally the trust did not meet the express 5%
requirement of § 664(d)(1)(A). In addition, one of the successor beneficiaries claimed
that the decedent had told her that she would not be liable for her share of the estate
taxes. The decedent’s estate settled the claim and paid a significant sum to the
beneficiary. As a result, there were insufficient funds in the estate to pay the estate tax,
and it was necessary to invade the trust corpus to make up the shortfall. The Tax Court
held that this was an additional reason to conclude that the trust failed to function
exclusively as a charitable remainder trust from the date of its creation. Accordingly, the
Tax Court found that the estate was not entitled to a charitable deduction in that case.

   In Rev. Rul. 80-58, 1980-1 C.B. 181, which did not involve a trust, the Service

stated that the legal concept of rescission refers to the abrogation, cancelling, or voiding
of a contract that has the effect of releasing the contracting parties from further
obligations to each other and restoring the parties to the relative positions that they
would have occupied had no contract been made. However, the annual accounting
concept requires that one must look at the transaction on an annual basis at the end of
the tax year. That is, each taxable year is a separate unit for tax accounting purposes.
Therefore, the annual accounting period principle requires the determination of income
at the close of the taxable year without regard to subsequent events.

    In § 3.02(8) of Rev. Proc. 2016-3, 2016-1 I.R.B. 126,133, the Service announced

that the question of whether a completed transaction may be rescinded for Federal
income tax purposes is an area in which rulings will not be issued. If the Court’s
declaration that Trust was void ab initio is given effect, we believe it would be equivalent
to a rescission. Accordingly, after taking into account both Rev. Rul. 80-58 and
§ 3.02(8) of Rev. Proc. 2016-3, we conclude that we are unable to provide a favorable
ruling that the Court’s declaration that Trust was void ab initio would have no federal tax
consequences. Without a favorable ruling on this issue, it appears that Court’s order
would default to Trust termination. In that event, the question becomes whether there
are federal tax consequences for such termination.

  Under the principles of § 1.664-1(a)(4) and Estate of Atkinson, Trust has failed to

operate exclusively as a charitable remainder trust from its creation by failing to operate

PLR-107392-14 7

in accordance with its terms, namely, by making distributions in excess of the annual
net trust income to the income beneficiary.

   Section 4947(a)(2), relating to split-interest trusts, provides that in the case of a

trust which is not exempt from tax under § 501(a), not all of the unexpired interests in
which are devoted to one or more of the purposes described in § 170(c)(2)(B), and
which has amounts in trusts for which a deduction was allowed under § 170 (or other
charitable deduction provisions), §§ 507, 4941, and 4945, among others, shall apply as
if such trust were a private foundation. This paragraph shall not apply with respect to—
(A) any amounts payable under the terms of such trust to income beneficiaries,
unless a deduction was allowed under § 170(f)(2)(B), 2055(e)(2)(B), or
2522(c)(2)(B),
(B) any amounts in trust other than amounts for which a deduction was allowed
under § 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if such other amounts
are segregated from amounts for which no deduction was allowable, or
(C) any amounts transferred in trust before May 27, 1969.

    Section 53.4947-1(a) provides that § 4947 subjects trusts which are not exempt

from taxation under § 501(a), all or part of the unexpired interests in which are devoted
to one or more of the purposes described in § 170(c)(2)(B), and which have amounts in
trust for which a deduction was allowed under § 170 (or other charitable deduction
provisions) to the same requirements and restrictions as are imposed on private
foundations. The basic purpose of § 4947 is to prevent these trusts from being used to
avoid the requirements and restrictions applicable to private foundations. For purposes
of this section, a trust shall be presumed (in the absence of proof to the contrary) to
have amounts under § 170 if a deduction would have been allowable under one of
these sections.

   In Virginian Hotel Corp. v. Helvering, 319 U.S. 523 (1943), the Supreme Court

held that “allowed” meant that the taxpayer had taken the deduction and the
Commissioner had not challenged it. Id. at 527. Noting that there was “no machinery
for formal allowances of deductions from gross income,” a deduction being claimed and
going unchallenged is the only way in which a deduction could be “allowed.”

     While Trust failed to operate exclusively as a charitable remainder unitrust and

thus maintain its tax exemption under § 664, it nevertheless is subject to the split-
interest trust rules under § 4947(a)(2). Trust is not exempt from tax under § 501(a), not
all of the unexpired interests in Trust are devoted to charitable purposes, and Trust has
amounts in trust for which a deduction was allowed under § 170. On this latter point,
because deductions were claimed by A under § 170 and were not challenged by the
Service, these deductions were “allowed” for purposes of § 170, under the reasoning of
Virginian Hotel Corp. Thus, Trust is treated as a private foundation for purposes of
certain chapter 42 excise taxes until it terminates its private foundation status under
§ 507.

PLR-107392-14 8

   Section 507(a) provides that, except as provided in § 507(b), the status of any

organization as a private foundation shall be terminated only if
(1) such organization notifies the Secretary (at such time and in such manner as
the Secretary may by regulations prescribe) of its intent to accomplish such
termination, or
(2)(A) with respect to such organization, there have been either willful repeated
acts (or failures to act), or a willful and flagrant act (or failure to act), giving rise to
liability for tax under chapter 42, and
(B) the Secretary notifies such organization that, by reason of § 507(a)(2)(A),
such organization is liable for the tax imposed by § 507(c),
and either such organization pays the tax imposed by § 507(c) (or any portion not
abated under § 507(g)) or the entire amount of such tax is abated under § 507(g).

    Section 507(c) provides that there is hereby imposed on each organization which

is referred to in § 507(a) a tax equal to the lower of (1) the amount in which the private
foundation substantiates by adequate records or other corroborating evidence as the
aggregate tax benefit resulting from § 501(c)(3) status of such foundation, or (2) the
value of the net assets of such foundation.

   Section 507(d)(1) provides that, for purposes of § 507(c), the aggregate tax

benefit resulting from the § 501(c)(3) status of any private foundation is the sum of –
(A) the aggregate increases in tax under chapters 1, 11, and 12 (or the
corresponding provisions of prior law) which would have been imposed with
respect to all substantial contributors to the foundation if deductions for all
contributions made by such contributors to the foundation after February 28,
1913, had been disallowed, and
(B) the aggregate increases in tax under chapter in tax under chapter 1 (or the
corresponding provisions of prior law) which would have been imposed with
respect to the income of the private foundation for taxable years beginning
after December 31, 1912, if (i) it had not been exempt from tax under § 501(a)
(or the corresponding provisions of prior law), and (ii) in the case of a trust,
deductions under § 642(c) (or the corresponding provisions of prior law) had
been limited to 20 percent of the taxable income of the trust (computed
without the benefit of § 642(c) but with the benefit of § 170(b)(1)(A), and
(C) interest on the increases in tax determined under §§ 507(d)(1)(A) and (B)
from the first date on which each such increase would have been due and
payable to the date on which the organization ceases to be a private
foundation.

   Section 507(e) provides that, for purposes of § 507(c), the value of the net assets

shall be determined at whichever time such value is higher: (1) the first day on which
action is taken by the organization which culminates in its ceasing to be a private
foundation, or (2) the date on which it ceases to be a private foundation.

PLR-107392-14 9

   Section 507(f) provides that, for purposes of determining liability for the tax

imposed by § 507(c) in the case of assets transferred by the private foundation, such
tax shall be deemed to have been imposed on the first day on which action is taken by
the organization which culminates in its ceasing to be a private foundation.

    Section 1.507-1(b)(1) provides that in order to voluntarily terminate its private

foundation status, an organization must submit a statement to the district director of its
intent to terminate its private foundation status under § 507(a)(1). Such statement must
set forth in detail the computation and amount of tax imposed under § 507(c). Unless
the organization requests abatement of such tax pursuant to § 507(g), full payment of
such tax must be made at the time the statement is filed under § 507(a)(1). For
purposes of subtitle F of the Code, the statement described in this subparagraph, once
filed, shall be treated as a return.

   Section 1.507-1(b)(8) provides that if a private foundation makes a transfer of all

or a significant part of its assets to another organization and prior to, or in connection
with, such transfer, liability for any tax under chapter 42 is incurred by the transferor
foundation, transferee liability may be applied against the transferee organization for
payment of such taxes.

   Section 1.507-1(c)(2) provides that for purposes of § 507(a)(2)(A), a “willful and

flagrant act (or failure to act)” is one which is voluntarily, consciously, and knowingly
committed in violation of any provision of chapter 42 (other than section 4940 or
4948(a)) and which appears to a reasonable man to be a gross violation of any such
provision.

   Section 1.507-1(c)(4) provides that for purposes of § 507(a)(2), the failure to

correct the act or acts (or failure or failures to act) which gave rise to liability for tax
under any section of chapter 42 by the close of the correction period for such section
may be a willful and flagrant act (or failure to act).

    Section 4941 imposes an excise tax, paid by the disqualified person, on each act

of self-dealing between a private foundation and a disqualified person for each year in
the taxable period, and requires correction of the act of self-dealing. Under
§ 4941(d)(1)(E), an act of self-dealing includes a transfer to a disqualified person of the
assets of a private foundation. The initial tax is 10% of the amount involved, with an
additional tax of 200% if the act is not corrected within the taxable period. There is also
an excise tax paid by the foundation manager on knowingly participating in the act
(unless not willful and due to reasonable cause), in the amount of 5% of the amount
involved for each year within the taxable period, with an additional tax of 50% for
refusing to agree to part or all of correction.

PLR-107392-14 10

    Section 4945 imposes an excise tax, paid by the private foundation, on each

taxable expenditure by a private foundation, and requires correction of the taxable
expenditure. Under § 4945(d)(5), a taxable expenditure includes an amount paid by a
private foundation for a purpose other than a charitable purpose. The initial tax is 20%
of the amount involved, with an additional tax of 200% if the expenditure is not corrected
within the taxable period. There is also an excise tax paid by the foundation manager
on knowingly agreeing to make the expenditure (unless not willful and due to
reasonable cause), in the amount of 5% of the expenditure, with an additional tax of
50% for refusing to agree to part or all of correction.

    Trust, a split-interest trust under § 4947(a)(2), proposes to distribute its assets to

the unitrust income beneficiary, E, without regard to the interest of the charitable
remainder beneficiary, pursuant to a court-ordered termination in a judicial proceeding
brought by Trust for this purpose. This distribution, prior to termination of its private
foundation status under § 507, would be a taxable expenditure under § 4945(d)(5)
(which prohibits a private foundation’s expenditure for non-charitable purposes), in the
amount of the actuarial value of the charitable remainder interest. As E is a disqualified
person with respect to Trust under § 4946(a)(1)(B) and (D), the distribution would also
be an act of self-dealing under § 4941(d)(1)(E) (which prohibits transfer of a private
foundation’s charitable assets to a disqualified person). Correction of the taxable
expenditure and act of self-dealing would be required, and failure to timely correct would
result in liability for additional second-tier taxes under §§ 4941(a)(2) and 4945(b)(1).
Such distribution, carried out after receipt of this letter ruling, may result in foundation
manager taxes payable by E for knowing participation in the act (and additional second-
tier taxes for any refusal to agree to correction).

   Trust may avoid these chapter 42 taxes by voluntarily terminating its private

foundation status under § 507(a)(1) prior to distribution of assets pursuant to the court
order, under the procedures set forth in § 1.507-1(b). This process entails giving the
IRS proper notice and computation and payment of § 507(c) tax. Pursuant to the Form
990-PF instructions, the notice with computation and payment of § 507(c) tax is
provided to the Manager of Exempt Organizations Determinations, Internal Revenue
Service, TE/GE—EO Determinations, PO Box 2508, Cincinnati OH 45201.

     Moreover, such distribution of assets to E by Trust (prior to terminating private

foundation status) may also be regarded as a willful and flagrant act giving rise to
liability for tax under chapter 42 (as voluntarily, consciously, and knowingly in violation
of chapter 42 and grossly contrary to the purpose of a split-interest trust, especially if E
fails to correct in a timely manner), justifying involuntary termination of the private
foundation status of Trust by the Service under § 507(a)(2) and assessment of tax
under § 507(c) in the amount of the aggregate tax benefit under § 507(d)(1), with
transferee liability for the taxes owed by Trust. Because § 4947(a)(2) applies § 507 to
Trust as if it were a § 501(c)(3) private foundation, the aggregate tax benefit for Trust
includes the amounts set forth in § 507(d)(1)(A) and (C); however, because Trust was

PLR-107392-14 11

never exempt from tax under § 501(a), the aggregate tax benefit for Trust does not
include the amount set forth in § 507(d)(1)(B).

CONCLUSIONS

  Based on the foregoing, we conclude as follows:

  1) Based on the principles as set forth in Estate of Atkinson, Trust is not
     respected as a CRUT because Trust did not function exclusively as a
     charitable remainder trust throughout its existence;
  2) For reasons stated above, we do not rule on whether Court’s declaration that
     Trust was void ab initio will not result in any additional federal tax;
  3) Trust is described in § 4947(a)(2);
  4) Distribution of Trust assets to the income beneficiary pursuant to the court
     order prior to termination of Trust’s private foundation status under § 507(a)
     will result in excise taxes under §§ 4941 and 4945, which will require
     correction. A judicial termination of Trust may also result in additional tax
     under § 507(c) equal to the lower of (1) the amount that Trust substantiates
     by adequate records or other corroborating evidence as the aggregate tax
     benefit as determined under § 507(d)(1)(A) and (C), or (2) the value of the net
     assets of Trust as determined under § 507(e); and
  5) Trust must file income tax returns and pay any income tax owed, plus interest
     and penalties, as a trust subject to taxation under Title 1, Subchapter J of the
     Code for any tax years that may remain open under § 6501(a) from the date
     of Trust’s establishment.

   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. Section 6110(k)(3) 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 ruling request, it is subject to verification on
examination.

PLR-107392-14 12

  In accordance with the power of attorney on file with this office, we are sending a

copy of this letter to Trust’s authorized representative.

                                 Sincerely,



                                 Bradford R. Poston
                                 Senior Counsel, Branch 3
                                 (Passthroughs & Special Industries)

Enclosures(2):
Copy of this letter
Copy for § 6110 purposes