EFTA00591271.pdf

Taxpayers: Leon Black and Debra Black ("Taxpayers") SSNs: Tax Form: 1040X Tax Year: 2014 Program for Voluntary Disclosure of Delinquent International Information Returns Statement of Reasonable Cause for--Failure4o--Timely-lzile-FOFMS-54743-886-5r 88-58-and 8938 Taxpayers, husband and wife, are hereby voluntarily filing the attached Form 1040X (the "Amended Return"), as well as a reasonable cause statement under Treas. Reg. § 1.6038- 2T(j)(3), for the sole purpose of filing Forms 5471, 8865, 8858 and 8938 (the Forms, together with the aforementioned statement, the "International Information Returns") for 2014, under the Internal Revenue Service's (the "IRS") 2014 Delinquent International Information Return Submission Procedures. The Taxpayers have not been contacted by the IRS regarding the • International Information Returns and have a long history of being fully compliant taxpayers. The Taxpayers are not under civil examination erttox criminal investigation by the IRS. This submission, pursuant to Treas. Reg. §§ I.6038-2(k)(3) and I.6038-3(k)(4), explains why the Taxpayers' failure to file the International Information Returns with the original Form 1040 for 2014 (the "Original Return") was due to reasonable cause and not willful neglect. Theja addition, the only change reflected in the Form 1040X b ' g filed today is the inclusion of the International Information Returns, and there is no change in either taxable income reported by the Taxpayers, or in the tax liability owed by the Taxpayers, for 2014, which was timely paid. The Original Return, the Amended Return and the accompanying International Information Returns were all prepared by the Taxpayers' professional accountants at Raich Ende Malter & Co. LLP ("REM-Co"). Background The Taxpayers own interests in a wide variety of entities relatecHeaffiliated with Apollo Global Management, LLC ("Apollo"), the publicly traded alternative asset manager, through their interest in BRH Holdings, L.P. (EIN: ("BRH" or the "Partnership"). Since the-ineeptian-of-BRI4rempleyees-efapolle-have-assisted-with In addition to their responsibilities for the preparation of the tax returns of BRH-as-well-as-all the other controlled foreign partnerships, controlled foreign corporations and foreign disregarded entities (the -Foreign Entities") listed on the enclosed Exhibit A,imployeesoratinternaLlax department of Apollo have also assisted with the nrenaration of the tax returns of B1W. TheAll of the Foreign Entities, other than BRH and AP Professional Holdings LP, are also owned, in part, indirectly by Apollo. The appropriate Apollo entities timely and properly filed the Forms 8865 and 8858 with respect to these Foreign Entities, but deieFFained-that-Apollo did-neidetermined there was no need to provide the underlying information to the Taxpayers, or alert the Taxpayers that they might have similar filing requirements. Thus, the Schedule K-I EFTA00591271 for 2014 from the Partnership, provided to the Taxpayers, included all items of taxable income and loss attributable to the Taxpayers' interest in the Partnership, but did not indicate any obligation to file the International Information Returns with respect to BRH or at g the many-other Foreign Entities held through BRH. In fact, the Schedule K-1 included a footnote specifically stating that there were no filing requirements with respect to foreign partnerships during the 2014 tax year, and therefore a filing of Form 8865 was not required. The footnote the Taxpayers did consult with their profesionat-aeeeuntants-at REM Co who did prepare and ftle-Fornt-8865-for-BR+H,ased-on-ilte-best-available-information-in-the-Sehedule-K-I-previded7 The other Foreign Entities referred to, are either indirectly or constructively owned, in whole or in part, by BRH, and, as such, the tax information of such Foreign Entities is not directly reported to the Taxpayers or their tax advisors, but instead is rolled into the tax reporting of BRH. As a result, neither the Taxpayers nor their accountants were aware that any other International Information Return filings were required and, in any case, they were not provided the information necessary to hays properly eempletecompleted the International Information Returns, making it impossible for the Taxpayers to timely file these informational returns. Importantly, all income reported on the Schedule K-I from the Partnership was properly and timely reported to the IRS on the Original Return. A Form 8938 was also timely filed by the Taxpayers with the Original Return and is only being amended today simply-to reflect the correct number of Forms 5471 and 8865 in Part IV required to be filed by the Taxpayers. The Taxpayers were unawarenot made aware of their obligation to file the International Information Returns until August 2016. At that time, the Taxpayers and their representatives were first informed by Apollo's tax department that the Taxpayers likelymav have had an obligation to file the International Information Returns with respect to BRH and the other Foreign Entities. Upon learning this information, the Taxpayers immediately requested additional information from bath Apollo and Deloitte (Apollo's tax advisor) and diligently reviewed the history and factual circumstances with their personal accountants and the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP. As-a-result-eaktconchtsionstached Jy that review, it-was determined-that the Taxpayers were-ebliatn obligation to file the International Information Returns with respect to the Foreign Entities for 2014-fineluding-seme-rniner-reperting-eltanges-te-the-previeusl.frfiled-BRHafRi-884-5), which the Taxpayers are now deingsatisfving via the filing of the Amended Return. The Taxpayers are neither accountants nor lawyers. Because the Taxpayers' ownership arrangements related to the Partnership and other Foreign Entities are very complex, the Taxpayers have engaged and relied on experienced accountants to prepare their tax returns based upon the information and records provided to them, including by Apollo's tax department, which is responsible for overseeing tax compliance and reporting for an extremely complex business enterprise, and by Apollo's tax advisors at Deloitte, which prepared the applicable Schedule K-1. Basis for Reasonable Cause The Taxpayers have exercised ordinary business care and prudence by engaging and relying on experienced tax professionals in making a good faith effort to comply with an intricate set of EFTA00591272 information reporting rules relating to a complex business enterprise. When the Taxpayers signed and filed the Original Return, on the advice of their experieiteed-tax advisors at REM- Co, the Taxpayers believed that the Original Return was both accurate and complete. In addition, the Taxpayers acted as-promptly as-practicable-upon learning of the potential filing oversight to gather all relevant records and information from the Apollo tax department and proyidedprovide such information to their tax advisors, resulting in thetodav's filing today-of the Amended Return and the International Information Returns. As noted, the Taxpayers have a long history of being &121 compliant taxpayers-aad-eernpliant-internatieaal-tax-filersr have .. The Taxpayers are not under a civil examination or a criminal investigation by the IRS. The IRS has not contacted the Taxpayers about any of the delinquent International Information Returns-thai-aferhe-subjeet-ef-this-subraissionT, The Foreign Entities that are the subject of the International Information Returns were not engaged in tax evasion. The Taxpayers are voluntarily filing the Amended Return today in order to ensure that all International Information Returns for 2014 have been properly filed. Finally, the Taxpayers also note that they have timely filed all required International Information Returns for the 2015 taxable period and will continue to ensure that all required International Information Returns are properly and timely filed in future taxable periods. Conclusion Based on the above, the Taxpayers believe, in good faith, that reasonable cause exists for their failure to file the International Information Returns with respect to the Foreign Entities with the Original Return. Therefore, the Taxpayers respectfully request that the IRS exercise its discretionary, regulatory authority to grant reasonable cause relief and not assert any penalties under Section 6038 of the Internal Revenue Code of 1986 or Treas. Reg. §§ I.6038-2(k)(1) or 1.6038-3(k)(3). EFTA00591273