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Exhibit 10.7
Department of the Treasury-Internal Revenue Service
Form 906
CLOSING AGREEMENT ON FINAL DETERMINATION
COVERING SPECIFIC MATTERS
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Under section 7121 of the Internal Revenue Code, Meridian Point
Realty Trust '00, 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxx 00000 (formerly
of 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000),
EIN: 00-0000000, (hereinafter the "Taxpayer"), and the Commissioner of Internal
Revenue (hereinafter the "Commissioner") make the following agreement:
WHEREAS, the Taxpayer has elected to be taxed as a Real Estate
Investment Trust (hereinafter a "REIT") during each taxable year since 1984;
WHEREAS, the so-called "75% asset test" of Section 856(c)(4)(A) of
the Internal Revenue Code of 1986, as amended (hereinafter the "Code"),
mandates that at the close of each quarter at least 75-percent of a REIT's
assets consist of real estate, cash, cash items and government securities;
WHEREAS, on September 30, 1997, and December 31, 1997, Xxxxxxxx was
invested in the Treasury Fund of Pacific Horizon Funds, Inc. (the "Treasury
Fund"), a mutual fund which owned government securities and repurchase
agreements;
WHEREAS, a dispute has arisen regarding the application of the 75%
asset test of Section 856(c)(4)(A) to Taxpayer's investment in the Treasury
Fund on September 30, 1997, and December 31, 1997;
WHEREAS, the so-called "5-percent asset test" of Section 856(c)(4)(B)
of the Code mandates that not more than 5-percent of the assets of a REIT may
be represented by the securities of one issuer at the close of each quarter in
which the issuer's security is acquired;
WHEREAS, in the quarters ending on September 30, 1997, December 31,
1997, March 31, 1998, and June 30, 1998, the Taxpayer was invested in the
Prime Fund of the Pacific Horizon Funds, Inc. (hereinafter the "Prime Fund").
WHEREAS, a dispute has arisen regarding the application of the
5-percent asset test of Section 856(c)(4)(B) to the Taxpayer's investment in
the Prime Fund in the quarters ending on September 30, 1997, December 31,
1997, March 31, 1998, and June 30, 1998, and the Taxpayer's investment in the
Treasury Fund in the quarters ending on September 30, 1997, and December 31,
1997;
WHEREAS, the Taxpayer inadvertently failed to meet the so-called
"75-percent income test" of Section 856(c)(3) in 1998, but met the so-called
"95-percent test" of Section 856(c)(2);
WHEREAS, following a proxy contest in Fall, 1998, the public
shareholders of the Taxpayer elected an entirely new Board of Directors for
the Taxpayer, which Board has brought these matters to the attention of the
Commissioner; and
WHEREAS, the Taxpayer and the Commissioner wish to resolve this
matter in its entirety.
NOW, THEREFORE, IT IS HEREBY DETERMINED AND AGREED, that for good and
adequate consideration, for federal income tax purposes with respect to
taxable years 1997 and 1998, that:
1. The Commissioner shall accept Taxpayer's status as a REIT for
1997 and 1998 and shall not assert any tax liability or penalty
against Taxpayer on the grounds that the Taxpayer failed to meet
either the 75-percent asset test of Section 856(c)(4)(A) or the
5-percent asset test of Section 856(c)(4)(B) as a result of
Taxpayer's
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Closing Agreement with Meridian Point Realty Trust `83
investment in the Treasury Fund or the Prime Fund. The Taxpayer
acknowledges that this Section 1 of this Agreement does not in
any other respect limit the Commissioner's ability to challenge
the Taxpayer's status as a REIT, or otherwise assert any
liability or penalty against the Taxpayer for failure to comply
with REIT requirements other than the 75-percent asset test of
Section 856(c)(4)(A) and the 5-percent asset test of Section
856(c)(4)(B) in 1997 and 1998.
2. The Commissioner shall accept Taxpayer's status as a REIT for
1998 and shall not assert any tax liability or penalty against
Taxpayer by reason of the Taxpayer's failure to comply with the
75-percent income test of Section 856(c)(3). The Taxpayer
acknowledges that Section 2 of this Agreement does not in any
other respect limit the Commissioner's ability to challenge the
Taxpayer's status as a REIT, or otherwise assert any liability
or penalty against the Taxpayer for failure to comply with REIT
requirements other than the 75-percent income test of Section
856(c)(3) in 1998.
3. The amount of gross income of the Taxpayer for 1998 to which the
determination in Section 2 of this Agreement applies is
approximately $106,000.
4. The amount of the 75-percent source-of-income requirement of
Section 856(c)(3) for 1998 to which the determination in Section
2 of this Agreement applies is approximately $79,500.
5. Because the Taxpayer's 75 percent income was approximately
$57,900, the Taxpayer failed to meet the 75-percent
source-of-income requirement of Section 856(c)(3) for 1998 by
the amount of approximately $21,600 ($79,500 - 57,900).
6. Although the Taxpayer failed to meet the 75-percent
source-of-income requirement of Section 856(c)(3) for 1998, the
Taxpayer is not liable for tax under Section 857(b)(5) because
the Taxpayer did not have taxable income in the year.
7. The Taxpayer's failure to meet the 75-percent source-of-income
requirement of Section 856(c)(3) for 1998 was due to reasonable
cause and not due to willful neglect.
8. The Taxpayer agrees to make a payment of forty thousand dollars
($40,000.00) in full and complete settlement of this matter. The
Taxpayer and the Commissioner agree that the payment will be a
nondeductible expense.
9. Since the Taxpayer's REIT status has been accepted, the Taxpayer
will not be required to file an amended income tax return or
Form 1099s for either 1997 or 1998 on the grounds that the
Taxpayer failed to meet either the 75-percent asset test of
Section 856(c)(4)(A) or the 5-percent asset test of Section
856(c)(4)(B) as a result of the Taxpayer's investment in the
Treasury Fund or the Prime Fund.
10. The shareholders of the Taxpayer will not be required to file
amended income tax returns for either 1997 or 1998 on the
grounds that the Taxpayer failed to meet either the 75-percent
asset test of Section 856(c)(4)(A) or the 5-percent asset test
of Section 856(c)(4)(B) as a result of Taxpayer's investment in
the Treasury Fund or the Prime Fund.
This agreement is final and conclusive except:
(1) the matter it relates to may be reopened in the event of fraud,
malfeasance, or misrepresentation of material facts;
(2) it is subject to the Internal Revenue Code sections that
expressly provide that effect be given to their provisions
(including any stated exception for Code Section 7122)
notwithstanding any other law or rule of law; and
(3) if it relates to a tax period ending after the date of this
agreement, it is subject to any law, enacted after the
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Closing Agreement with Meridian Point Realty Trust `83
agreement date, that applies to that tax period.
By signing, the above parties certify that they have read and agreed to the
terms of this document.
Your signature ________________________________ Date Signed__________________
Spouse's signature_____________________________ Date Signed__________________
(if a joint return was filed)
Taxpayer's representative______________________ Date Signed__________________
Taxpayer(other than individual) Meridian Point Realty Trust `83
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By: /s/ Xxxxxx X. Xxxxx Date Signed 6/4/99
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Title: President
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Commissioner of Internal Revenue
By: /s/ Xxxxx X. Xxxxxxx Date Signed 6/8/99
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Title: Chief, QMSSB
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Closing Agreement with Meridian Point Realty Trust `83
Instructions
This agreement must be signed and filed in triplicate. (All copies must have
original signatures.)
The original and copies of the agreement must be identical.
The name of the taxpayer must be stated accurately.
The agreement may relate to one or more years.
If an attorney or agent signs the agreement for the taxpayer, the power of
attorney (or a copy) authorizing that person to sign must be attached to the
agreement. If the agreement is made for a year when a joint income tax return
was filed by a husband and wife, it should be signed by or for both spouses.
One spouse may sign as agent for the other if the document (or a copy)
specifically authorizing that spouse to sign is attached to the agreement.
If the fiduciary signs the agreement for a decedent or an estate, an attested
copy of the letters testamentary or the court order authorizing the fiduciary
to sign, and a certificate of recent date that the authority remains in full
force and effect must be attached to the agreement. If a trustee signs, a
certified copy of the trust instrument or a certified copy of extracts from
that instrument must be attached showing:
(1) the date of the instrument;
(2) that it is or is not of record in any court;
(3) the names of the beneficiaries;
(4) the appointment of the trustee, the authority granted, and other
information necessary to show that the authority extends to
Federal tax matters; and
(5) that the trust has not been terminated, and that the trustee
appointed is still acting. If a fiduciary is a party, Form 56,
Notice Concerning Fiduciary Relationship, is ordinarily
required.
If the taxpayer is a corporation, the agreement must be dated and signed with
the name of the corporation, the signature and title of an authorized officer
or officers, or the signature of an authorized attorney or agent. It is not
necessary that a copy of an enabling corporate resolution be attached. See 26
C.F.R.601.504(b)(2)(ii) as to dissolved corporations.
Use additional pages if necessary, and identify them as part of this
agreement.
Please see Revenue Procedure 68-16,C.B. 1968-1, page 770, for a detailed
description of practices and procedures applicable to most closing agreements.
I have examined the specific matters |
involved and recommend the acceptance of the |
proposed agreement. |
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/s/ Xxxxx X. Xxxxxxxx 6/8/99 |
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(Receiving Officer) (Date) |
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Revenue Agent Reviewer |
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(Title) |
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I have reviewed the specific matters |
involved and recommend approval of the |
proposed agreement. |
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/s/ Xxxxx X. Xxxxxxxx 6/8/99 |
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(Receiving Officer) (Date) |
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Ohio District Technical Coordinator |
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(Title) |
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