Private Letter Ruling Number
L1: Private Letter Ruling Number: 201051025Internal Revenue Service, Private Letter Ruling Number: 201051025, September 30, 2010
Problem: In year 1, the taxpayer took a full annual distribution. In year 2 the taxpayer switched to monthly distributions. In months 1 & 2 of year 2, the custodian distributed incorrect monthly amounts to the taxpayer. The taxpayer notified the custodian and the amounts were corrected. Each year thereafter until year 6, the taxpayer took monthly distributions. In year 6, the custodian only made 11 monthly distributions instead of 12. The taxpayer stated that he only leaned of the failure to receive 12 monthly payments when he received the 1099-R for year 6 in year 7.
Request: Based on the above events, the taxpayer requested rulings that: 1) the failure to distribute the full amount in year 6 with a makeup distribution in year 7 would not be considered a modification of the SEPP and would not be subject to the 10% penalty; and 2) that the switch in year 2 from an annual distribution to a monthly distribution would not be a modification of the SEPP and would not be subject to the 10% penalty.
Ruling: The IRS ruled favorably for the taxpayer on both issues.
PLR on LegalBitStream: http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl7194/1/doc
Special Note: While this was a favorable ruling for the taxpayer, as with all PLRs the last sentence states… “This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.”
Thanks to Dlz for sending me the information.2011-03-26 15:34, By: Gfw, IP: [22.214.171.124]
L2: Private Letter Ruling Number: 201051025>”This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of >the Code provides that it may not be used or cited as precedent.”
Isn’t that one of the more chicken-hearted things that the government does? If the IRS is making a correct ruling, even if it is just they who are defining it, should it not be correct for ALL tax-payers? Has this been adjudicated vs. the equal protection clause of the US Constitution? My guess would be no.2011-03-27 01:19, By: Ed_B, IP: [126.96.36.199]
L3: Private Letter Ruling Number: 201051025Nina Olson, National Taxpayer Advocate, in her latest report to Congress criticized the IRS for this same situation – Numerous PLRs on the same issue with the same result, but IRS still refuses to elevate them to Revenue Rulings or Regulations so that other taxpayers can use them.
We think that they are using PLRs as a means to reduce the Tax Gap, especially because they cannot properly administer the basic tax code. We could probably eliminate the National Debt if the IRS had not given away Billions/Trillions of fraudulent refunds for EITC, Homebuyer Credits, Refunds to Inmates, Illegal refunds to IRS employees, Tax Shelters, etc, etc, etc2011-03-27 01:40, By: dlzallestaxes, IP: [188.8.131.52]
L4: Private Letter Ruling Number: 201051025I agree with you and Nina on this and it is likely that a lot of others out there do as well. Perhaps what is needed is some pressure from Congress? We have a lot of new House members who would no doubt love to make some headlines with this.
That there is corruption in the IRS is not a bit surprising, considering the people who were in charge of their oversight… and perhaps some of them still are. I usually think of them as “the usual cast of suspects”.2011-03-27 02:41, By: Ed_B, IP: [184.108.40.206]
L5: Private Letter Ruling Number: 201051025 I am afraid I need to take to the opposite side of this argument for several reasons:
In no way do I defend the IRS, however, IRC 6110(k) has been around forever and was enacted by Congress & signed by a President. The IRS did not and can not enact a code section. Therefore, the IRS’s warning on precedent is correct, required and at the express wishes of Congress.
I like this ruling on its basic merits irrespective of whether or not the IRS has the statutory authority to rule affirmatively in this case. I suspect they do not, nonetheless the IRS is the 800 pound gorilla in this case. As a result, the IRS has substantial latitude when issuing a PLR that they may not have when issuing a revenue ruling.
This PLR is a whopping three pages long with less than two pages of real beef; the rest is a regurgitation of citations. The PLR request as submitted would be at least 30 pages long. Might there be some relevant facts & issues omitted from the redacted publication of the PLR that are pertinent or peculiar to this taxpayer? I can guarantee you that there are! Rarely are all the facts presented. As a result, it is appropriate to limit the PLR’s use to the requesting taxpayer.
This taxpayer just paid approximately $15,000 to $20,000 in cash to receive this ruling. And, you want a free ride?
Now, with all of the above said, should some one in Tax Exempt & Governmental Entities Division of the IRS collect up the 150 or so rulings on IRC 72(t)(2)(A)(iv) along with Revenue Ruling 2002-62 and issue a much more concise and comprehensive 2011-xxx ruling? Now we are in agreement. Regards TheBadger firstname.lastname@example.org 14:44, By: TheBadger, IP: [220.127.116.11]
L6: Private Letter Ruling Number: 201051025I am afraid that we will have to agree to disagree. I understand and appreciate your reasons but have my own as well.
As to a “free ride”, my answer to that would be that I never even implied this. If it were possible for other tax-payers to piggy-back on an IRS ruling, whether or not it was a PLR, they should have to pay a fee as well. Since the vast bulk of the effort required to apply for and receive a PLR would already have been done, the fee could be substantially less but certainly not zero. If hundreds or thousands of other tax-payers could make use of a PLR, then they would be paying fees that would total a significantly higher amount than that paid by the original PLR requester. A small part of this fee could even be rebated to the original requester, if that seemed desirable. Perhaps the 2nd hand version could be called a Public Letter Ruling?
This country has a HUGE number of laws. Many of them have flaws that can and should be resolved. A lot of them are completely obsolete and should be discarded entirely. Unfortunately, law makers rarely ever take the time to do this. Only in the most egregious cases do we see this occur. I don’t know… perhaps it is in the “wouldn’t it be nice if…” category?
2011-03-28 00:53, By: Ed_B, IP: [18.104.22.168]
L7: Private Letter Ruling Number: 201051025Your idea of POBLIC LETTER RULINGS, with significantly lower fees, and remitting some portion to the initial taxpayer, are intersesting ideas.Unfortunately. I doubt that it would ever happen.2011-03-28 14:18, By: dlzallestaxes, IP: [22.214.171.124]
L8: Private Letter Ruling Number: 201051025I am afraid that I have to agree with you on that, Dlz. Like a lot of other things that would be useful, it is unlikely to ever happen. Such is the nature of politics.2011-03-28 15:38, By: Ed_B, IP: [126.96.36.199]
L9: Private Letter Ruling Number: 201051025A practical dilemma with a PLR is that a given situation may be 75%, 80%, 98% etc identical to that for which the PLR was issued. At what point do you just assume your situation is sufficiently identical to just act as if it was that of the original applicant and at what lesser point do you you have a viable case to spend the big bucks to apply for your own PLR?A 72t plan letter ruling that costs 10k plus legal fees is pretty stiff unless you are confident of a favorable ruling or the amounts justify the costs. But if you are VERY confident, why spend the money? For example, the PLR cited here is fully consistent with dozens of other ution error rulings in the taxpayer’s favor. If your situation is close enough, why not claim the exception on a 5329, correct the distribution in accord with the PLR, and wait for the IRS to send an inquiry? If you get one,reply to the inquiry with your circumstances and cite one or more PLRs as precedent even though they are not formally so and take your chances. If the IRS still insists your plan is busted, then you could decide to pursueyour ownPLR or pay up.One challenge to the above is that the IRS takes its merry time to respond to your submission and meanwhile you still need distributions from your IRA to live on. So unlike a one shot IRS levy, you are in an ongoing situation not knowing whether you have a valid plan or not and your potential penalties are increasing by the month. We don’t hear much about what happens to applicants while they are waiting for months to determine the outcome of an application or even an unofficial response to an inquiry.2011-03-28 21:48, By: Alan S., IP: [188.8.131.52]
L10: Private Letter Ruling Number: 201051025Good points, Alan.
I’m thinking that we don’t hear much from the folks who get PLRs is that they are probably mentally, physically, and emotionally drained by this process.
Also know what you mean about the IRS taking its time. Any time that I have dealt with a government agency, whether local, state, or federal, they want my info ASAP… usually within 30 days of receipt of their mailed notice. When it is their turn to respond, well, then 90 days to respond is good… for them, anyway. I understand that they are busy folks and all that but tax-payers have more to their lives than responding to their inquiries. Or do we? Maybe not.2011-03-28 22:58, By: Ed_B, IP: [184.108.40.206]