department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number ---------------------- refer reply to cc corp b05 plr-112342-13 date date internal_revenue_service number release date index number ------------------------- ------------------------------------------------------------ ------------ ------------------------ ------------------------ ----------------------------- ------------------------ ------------------------------------------------------ ------------------------ ------------------------ ---------------------------------- exchange ------------------------------------- distributing ------------------------ -------------------------------- ------------------------ distributing distributing distributing distributing controlled ------------------------------------------ -------------------------------- ---------------------- -------------------------------- ------------------------------- -------------------------------- ------------------------------------------------------------- -------------------------------- -------------------------------------- -------------------------------------------------------- plr-112342-13 newco sub sub sub sub sub sub sub sub fsub fsub fsub dre dre ----------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------- -------------------------------- ------------------------- -------------------------------- ------------------------------ -------------------------------- ------------------------- -------------------------------- -------------------------- -------------------------------- ------------------------------------------ -------------------------------- ------------------------------------------- -------------------------------- ---------------------------------- -------------------------------- ----------------------------------- -------------------------------- ---------------------------------- ---------------------------- ------------------------- ---------------------------- ------------------------------------------------------------ ---------------------------- ---------------------------- ------------------------ ---------------------------------------------- ------------------------------------------------- plr-112342-13 dre dre ----------------------------------------- --------------------------------- ----------------------------------- --------------------------------- business a ---------------------------- business b ------------------------------ business c business d business e -------------------------------------------- ------------------------------------- ----------------------------- business f ------------------------------------------- business g business h certain assets state a state b state c date date date date date ---------------------------------------- -------------------------- ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ ---------------------------------------------------- -------------- -------------- -------------- --------------------------- -------------------------- -------------------------- ------------------ -------------------- plr-112342-13 date date date date a b c d e f g h i j k l m n o p ------------------- -------------------- ------------------------ -------------------------- -------- ------ ------ ------ ---- ---------------- -------------- -------- -- -- -------- ----- -------------------- -------------------- ---- ---- plr-112342-13 dear ---------------------------------- this letter responds to your date letter submitted by your authorized representatives requesting rulings on certain u s federal_income_tax consequences of the proposed transactions defined below the material information submitted in that request and in later correspondence is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in particular this office has not reviewed any information pertaining to and has made no determination regarding whether any of the distributions or foreign distributions each defined below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or controlled_corporation or combination thereof see sec_355 and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest in any distributing_corporation or controlled_corporation see sec_355 and sec_1_355-7 summary of facts distributing is a publicly traded corporation and the parent of a worldwide group of entities the distributing group distributing is also the common parent of an affiliated_group_of_corporations filing a consolidated u s federal_income_tax return the distributing consolidated_group distributing has two classes of stock outstanding class a and class b common_stock each of which trade on the exchange distributing has two shareholders that own percent or more of the voting_stock in distributing the distributing group is engaged in a number of businesses including business a and business b before the occurrence of any steps relating to the proposed transaction the distributing group was structured as follows distributing wholly owned among other subsidiaries distributing and sub distributing together with other members of the distributing group owned all of the equity in sub each of distributing sub and sub is a state a corporation sub wholly owned among other subsidiaries fsub an entity that is treated as a corporation for u s federal_income_tax purposes fsub directly owned a percent of the equity in fsub an entity that is treated as a corporation for u s federal income plr-112342-13 tax purposes and b percent of the equity in fsub through its ownership of dre an entity that is disregarded as separate from its sole owner for u s federal_income_tax purposes a disregarded_entity fsub owned all of the equity in dre a disregarded_entity through a series of entities each of which is a disregarded_entity distributing wholly owned distributing which wholly owned distributing which wholly owned distributing each of distributing distributing and distributing is a state a corporation distributing is a state b corporation distributing wholly owned sub and sub each a state a corporation sub wholly owned sub a state a corporation and dre sub wholly owned sub and sub each a state a corporation sub owned c percent of the sub equity the sub sub stock sub owned d percent of sub equity the sub sub stock and sub owned e percent of the sub equity the sub sub stock distributing and other wholly owned subsidiaries of distributing owned the remaining equity in sub sub held f shares of distributing's class b common_stock the sub hook_stock and sub held g shares of distributing's class b common_stock sub also currently owns all of the stock in sub a state a corporation distributing a member of the distributing separate_affiliated_group as defined in sec_355 a sag and such sag the distributing sag directly engages in business c which is part of business a sub and sub each directly engages in business d which is part of business b sub directly engages in business e which is part of business b since date sub has continuously owned the sub sub stock which stock has continuously constituted more than h percent of sub 7's assets since such date distributing has determined that the separation of business b from business a will serve the following corporate business purposes i to enable the management team of each business to focus on its relevant business and its requirements and performance without the distraction of one or more businesses operating under a different business model ii to provide distributing and controlled with a more attractive equity currency for acquisitions iii to enhance and align the equity-based incentive programs of distributing and controlled to better reflect the specific business objectives goals and financial performance of each business and iv to better enable each of distributing and controlled to independently optimize its capital structure and return_of_capital policies collectively the corporate business_purpose plr-112342-13 distributing will pay the expenses associated with the proposed transaction on behalf of distributing and its affiliates except that controlled will pay its own expenses following the ipo defined below distributing and controlled will enter into certain agreements in connection with the implementation of the proposed transactions which may include i a separation and distribution agreement ii a tax_matters_agreement iii a transition services agreement iv an employee matters agreement and v an intellectual_property agreement collectively the continuing agreements as part of the proposed transactions after the external distribution as defined below controlled may elect to become a real_estate_investment_trust a reit and such election the reit election in this event controlled will jointly elect with certain of its corporate subsidiaries to have such subsidiaries treated as taxable reit subsidiaries trss within the meaning of sec_856 effective on the first day of controlled's first taxable_year as a reit any other corporate subsidiaries of controlled including potentially newco would then be treated as qualified reit subsidiaries within the meaning of sec_856 proposed transactions for what are represented to be valid business purposes distributing has undertaken or proposes to undertake although not necessarily in the order enumerated below the following steps the proposed transactions i ii iii iv on date sub contributed the sub hook_stock to its wholly owned subsidiary sub on date i days later sub contributed its interest in dre business h and the sub sub stock to sub later on date sub distributed the stock of sub to its sole shareholder distributing in a distribution intended to qualify as tax-free under sec_355 for which rulings are not being sought on date distributing contributed all of the outstanding shares of sub to newco a newly formed state c_corporation in exchange for newco stock sub then converted from a corporation to a single member limited_liability_company sub llc that is treated as an entity disregarded as separate from its sole owner newco for u s federal_income_tax purposes the sub reorganization v on date sub formed dre a disregarded_entity plr-112342-13 vi on date fsub and dre formed fsub an entity that is treated as a corporation for u s federal_income_tax purposes and the business f entities and assets were consolidated under fsub the fsub formation through a series of internal restructuring steps for which rulings are not being sought vii on date distributing contributed certain business a assets to sub viii on date distributing sold sub to sub llc for nominal cash equal to the fair_market_value of sub ix x xi xii for u s federal_income_tax purposes fsub will distribute its k percent interest in fsub to fsub the fsub distribution fsub will distribute its k percent interest in fsub to sub the fsub distribution sub will convert from a corporation to a single member limited_liability_company that will for u s federal_income_tax purposes be treated as an entity disregarded as separate from its sole owner distributing the sub liquidation sub will distribute the sub sub stock and the stock of sub to distributing in a distribution that is disregarded for u s federal_income_tax purposes xiii for u s federal_income_tax purposes sub will distribute its l percent interest in fsub to distributing in a value-for-value redemption of a portion of the sub sub stock held by distributing the sub exchange and together with the fsub distribution and the fsub distribution the foreign distributions xiv sub will convert into a single member limited_liability_company that will be treated as a disregarded_entity sub llc with sub llc surviving the sub reorganization xv sub llc will distribute the sub sub stock to distributing in a distribution that is disregarded for u s federal_income_tax purposes xvi distributing will contribute the stock of fsub the interests in sub llc and the stock of newco to controlled a newly formed state c_corporation in exchange for stock of controlled and an amount of cash expected to equal the aggregate proceeds from the controlled borrowing defined below plus the ipo less any cash required by controlled for the plr-112342-13 purging distribution or other operating needs the cash amount and such contribution the contribution xvii controlled will borrow approximately dollar_figurem to dollar_figuren from third-party lenders the controlled borrowing xviii controlled will sell less than o percent of its shares to one or more underwriters in an initial_public_offering including any exercise of an over- allotment option ipo xix controlled will use the proceeds received in the controlled borrowing and the ipo to fund the cash amount xx distributing will distribute all of its interest in controlled to distributing internal distribution xxi distributing will distribute all of its interest in controlled to distributing internal distribution xxii distributing will distribute all of its interest in controlled to distributing internal distribution xxiii distributing will distribute all of its interest in controlled to distributing internal distribution and together with internal distributions the internal distributions the internal distributions together with the external distribution defined below the distributions xxiv distributing will commence one or more exchange offers pursuant to which distributing will offer in one or more offerings to exchange all of its controlled common_stock for outstanding shares of distributing common_stock the external split-off the exchange ratio for each exchange_offer will be determined under a formula to be set by distributing and may include a premium to induce holders of distributing common_stock to tender their distributing common_stock in the exchange offers the premium offered may differ from time to time if there are different offerings pursuant to the exchange offers xxv if all of the shares of controlled common_stock held by distributing after the ipo are not subscribed for in the exchange offers the balance of the controlled common_stock held by distributing will be distributed as promptly as practicable to the holders of distributing common_stock on a pro_rata basis the external spin and together with the external split- off the external distribution the exchange offers and any required pro_rata distribution with respect to the external spin will be completed no later than one year after the consummation of the first exchange_offer plr-112342-13 distributing will not distribute fractional shares of controlled common_stock in the external distribution rather the distribution agent will aggregate and sell on the open market all fractional shares of controlled common_stock and distribute to each holder of distributing common_stock that otherwise would receive a fractional share of controlled common_stock in the external distribution its proportionate share of the net_proceeds of such sale xxvi after the external distribution controlled expects to make a reit election in this event controlled will jointly elect with certain of its subsidiaries to have such subsidiaries treated as trss effective on the first day of controlled's first taxable_year as a reit in addition controlled will make an election under sec_1033 to treat certain assets as real_property for purposes of chapter of the code xxvii if a reit election is made controlled will declare a dividend in an amount at least equal to the purging distribution amount within the last three months of the calendar_year with respect to which controlled makes the reit election the purging distribution will be paid no later than date of the following calendar_year xxviii within p months of the external distribution the cash amount will be distributed up the chain of ownership from distributing to distributing distributing will use the entire cash amount to repay or redeem outstanding indebtedness of the distributing consolidated_group and or make distributions to shareholders of distributing representations the following representations have been made with respect to the proposed transactions the sub reorganization a b c distributing received solely newco stock in the sub reorganization following the sub reorganization distributing owned all of the outstanding_stock in newco and owned such stock solely by reason of its ownership of all of the stock in sub immediately prior to the sub reorganization the fair_market_value of the newco stock received by distributing was approximately equal to the fair_market_value of the sub stock surrendered in exchange therefor plr-112342-13 d at the time of the sub reorganization sub did not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could have acquired shares of sub e with regard to the assets deemed transferred from sub to newco both i the total adjusted_basis of the assets and ii the fair_market_value of the assets each equaled or exceeded the sum of the liabilities as determined under sec_357 assumed by newco f g h all liabilities to which the sub assets were subject at the time of the sub reorganization and all liabilities of sub that were properly treated as being assumed by newco in the sub reorganization as determined under sec_357 were incurred in the ordinary course of business and were associated with assets deemed transferred from sub to newco at all times prior to the deemed acquisition of the assets of sub in the sub reorganization i newco had not been engaged in any business activity ii newco had no u s federal_income_tax attributes attributes described in sec_381 and iii newco held no assets other than a nominal amount of cash required for the purpose of paying newco's incidental_expenses or necessary to maintain newco's status as a corporation in accordance with the laws of its jurisdiction of incorporation immediately after the sub reorganization newco held through sub llc all of the assets held by sub immediately prior to the sub reorganization except for assets used to pay expenses in connection with the sub reorganization the assets used to pay expenses were less than j percent of the fair_market_value of the net assets of sub immediately prior to the sub reorganization no assets were distributed and there were no dissenting shareholders i sub was not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 at the time of the sub reorganization the foreign distributions for purposes of the following representations each of the foreign distributions is referred to as a foreign distribution and the corporation that distributes the stock of fsub in a foreign distribution is referred to as the foreign distributing_corporation plr-112342-13 j k l m n o p the indebtedness if any owed by fsub to the foreign distributing_corporation after each foreign distribution will not constitute stock_or_securities no part of the consideration to be distributed in each foreign distribution will be received by the foreign distributing corporation's shareholder s as a creditor employee or in any capacity other than that of a shareholder the distribution of fsub stock to foreign distributing corporation’s shareholder s in a foreign distribution is with respect to such shareholder s ’ ownership of the foreign distributing corporation’s stock the foreign distributing_corporation and fsub will treat all members of their respective sags as defined in sec_355 as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied the five years of financial information submitted for business g as conducted by the foreign distributing sag is representative of the present operations of business g and there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted for business f as conducted by the fsub sag is representative of the present operations of business f and there have been no substantial operational changes since the date of the last financial statements submitted the foreign distributing_corporation sag neither acquired_business g nor acquired control of an entity conducting business g during the five- year period ending on the date of each foreign distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part throughout the five-year period ending on the date of each foreign distribution the foreign distributing_corporation sag has been the principal_owner of the goodwill and significant assets of business g and will continue to be the principal_owner following each foreign distribution the fsub sag neither acquired_business f nor acquired control of an entity conducting business f during the five-year period ending on the date of each foreign distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part throughout the five-year period ending on the date of each foreign distribution the fsub sag has been or will be treated as having been the principal_owner of plr-112342-13 q r s t u v w x the goodwill and significant assets of business f and will continue to be the principal_owner following each foreign distribution no intercorporate debt will exist between the foreign distributing_corporation and fsub at the time of or subsequent to each foreign distribution except for indebtedness arising in the ordinary course of business except as set forth in the continuing agreements payments made in connection with all continuing transactions following the proposed transactions between the foreign distributing_corporation and fsub will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length following each foreign distribution the foreign distributing_corporation sag will continue the active_conduct of business g independently and with its separate employees and the fsub sag will continue the active_conduct of business f independently and with its separate employees the steps of the fsub formation will not result in business f being acquired by fsub in a transaction in which gain_or_loss was recognized within the meaning of sec_355 each foreign distribution is being carried out for the corporate business_purpose of facilitating the external distribution and is motivated in whole or substantial part by this corporate business_purpose no foreign distribution is being used principally as a device for the distribution of the earnings_and_profits of the foreign distributing_corporation or fsub immediately after each foreign distribution i any person that holds a percent or greater interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 will have held such an interest in such corporation immediately before the transaction or ii neither the foreign distributing_corporation nor fsub is or will be a disqualified_investment_corporation for purposes of sec_355 for purposes of sec_355 immediately after each foreign distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of stock of the foreign distributing_corporation entitled to vote or percent or more of the total value of shares of all classes of stock of the foreign distributing_corporation that was acquired plr-112342-13 y z by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of each foreign distribution for purposes of sec_355 immediately after each foreign distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of fsub stock entitled to vote or percent or more of the total value of shares of all classes of fsub stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of each foreign distribution or ii attributable to distributions on stock of the foreign distributing_corporation that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of each foreign distribution each foreign distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in the foreign distributing_corporation or fsub including any predecessor or successor of any such corporation the fsub distribution 2a fsub will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to fsub immediately before and after the fsub distribution and a sec_1248 shareholder with respect to fsub immediately after the fsub distribution 2b fsub will be a controlled_foreign_corporation within the meaning of sec_957 immediately before and each of fsub and fsub will be a controlled_foreign_corporation within the meaning of sec_957 immediately after the fsub distribution 2c the notice requirements of sec_1_367_b_-1 will be satisfied for the fsub distribution 2d the fsub distribution is not an exchange described in sec_1 b i b -4 b i or b -4 b 2e the fsub distribution will not include the transfer of stock of any corporation that has been a u s transferor the transferee foreign_corporation or the transferred corporation with respect to any unexpired plr-112342-13 gain_recognition_agreement within the meaning of sec_1_367_a_-3 sec_1_367_a_-8 and sec_1_367_a_-8t 2f following the fsub distribution fsub will compute its pre-distribution amount and post-distribution amount with respect to fsub and fsub as defined under sec_1_367_b_-5 and to the extent the pre-distribution amount exceeds the post-distribution amount with respect to either fsub or fsub fsub will make basis adjustments and recognize income if any as required under the applicable treasury regulations 2g neither fsub nor fsub will have been a u s real_property holding corporation as defined in sec_897 at any time during the five- year period ending on the date of the fsub distribution 2h neither fsub nor fsub will be a u s real_property holding corporation immediately after the fsub distribution 2i fsub will not hold any u s real_property interests as defined in sec_897 immediately before or after the fsub distribution the fsub distribution 2j 2k sub will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to fsub immediately before and after the fsub distribution and a sec_1248 shareholder with respect to fsub immediately after the fsub distribution fsub will be a controlled_foreign_corporation within the meaning of sec_957 immediately before and each of fsub and fsub will be a controlled_foreign_corporation within the meaning of sec_957 immediately after the fsub distribution 2l the notice requirements of sec_1_367_b_-1 will be satisfied for the fsub distribution 2m the fsub distribution will not include the transfer of stock of any corporation that has been a u s transferor the transferee foreign_corporation or the transferred corporation with respect to any unexpired gain_recognition_agreement within the meaning of sec_1_367_a_-3 sec_1_367_a_-8 and sec_1_367_a_-8t 2n following the fsub distribution sub will compute its pre-distribution amount and post-distribution amount with respect to fsub and fsub as defined under sec_1_367_b_-5 and to the extent the plr-112342-13 pre-distribution amount exceeds the post-distribution amount with respect to either fsub or fsub fsub will make basis adjustments and recognize income if any as required under the applicable treasury regulations 2o neither fsub nor fsub will have been a u s real_property holding corporation as defined in sec_897 at any time during the five- year period ending on the date of the fsub distribution 2p neither fsub nor fsub will be a u s real_property holding corporation immediately after the fsub distribution 2q fsub will not hold any u s real_property interests as defined in sec_897 immediately before or after the fsub distribution the sub liquidation 2r sub and distributing will adopt a plan_of_liquidation by conversion of sub into a limited_liability_company sub plan_of_liquidation and the sub liquidation will occur pursuant to the sub plan_of_liquidation 2s distributing on the date of the adoption of the sub plan_of_liquidation and at all times thereafter until the sub liquidation is completed will own percent of the single outstanding class of sub stock 2t no shares of sub stock will have been redeemed during the three years preceding the date of the sub liquidation 2u the distribution by sub to distributing that will be deemed to occur pursuant to the sub liquidation will take place on a single day and such distribution will be with respect to distributing 1’s ownership of the sub stock 2v as of the effective date of the sub liquidation all of the stock of sub will be canceled and sub will cease to be an entity that is separate from distributing for u s federal_income_tax purposes 2w sub as a corporation will not retain any assets following the sub liquidation for federal_income_tax purposes 2x except with respect to transfers made pursuant to the steps of the proposed transactions sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to adoption of the plan_of_liquidation plr-112342-13 2y except with respect to transfers made pursuant to the steps of the proposed transactions no assets of sub have been or will be disposed of by either sub or distributing except for dispositions in the ordinary course of business and dispositions occurring more than three years prior to adoption of the plan_of_liquidation 2z sub will report all earned_income represented by assets that will be deemed distributed to distributing such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc 3a the fair_market_value of the assets of sub will exceed its liabilities both at the date of the adoption of the plan of complete_liquidation and immediately prior to the time the sub liquidation occurs 3b there is no intercorporate debt existing between distributing and sub and none has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the date of adoption of the liquidation plan 3c distributing is not an organization that is exempt from federal_income_tax under sec_501 or another provision of the code 3d except with respect to transactions comprising steps of the proposed transactions and transfers in the ordinary course of business the sub liquidation will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation of any of the businesses or assets of sub if persons holding directly or indirectly more than percent in value of the stock of sub also hold directly or indirectly more than percent in value of the stock in such recipient for purposes of this representation ownership will be determined immediately after the external distribution by application of the constructive_ownership rules of sec_318 as modified by sec_304 3e all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the sub liquidation have been fully disclosed the sub exchange 3f distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to fsub immediately after the sub exchange 3g the sub exchange will not include the transfer of stock of any corporation that has been a u s transferor the transferee foreign plr-112342-13 corporation or the transferred corporation with respect to any unexpired gain_recognition_agreement within the meaning of sec_1_367_a_-3 sec_1_367_a_-8 and sec_1_367_a_-8t 3h following the sub exchange distributing and sub respectively will make basis adjustments and recognize income if any as required under the applicable treasury regulations and distributing and sub will comply with the requirements of sec_1_1248_f_-1 and sec_1 f - 3i 3j 3k neither distributing nor fsub will have been a u s real_property holding corporation as defined in sec_897 at any time during the five-year period ending on the date of the sub exchange neither distributing nor fsub will be a u s real_property holding corporation immediately after the sub exchange fsub will not hold any u s real_property interests as defined in sec_897 immediately before or after the sub exchange the sub reorganization 3l the fair_market_value of the distributing stock deemed to be received by distributing will be approximately equal to the fair_market_value of the sub stock deemed to be surrendered in the sub reorganization 3m in the sub reorganization no consideration other than voting_stock of distributing will be or will be deemed to be issued 3n for u s federal_income_tax purposes distributing will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by sub immediately prior to the sub reorganization and such acquisition will be in exchange solely for the deemed issuance of distributing voting_stock for purposes of this representation amounts paid_by sub to dissenters amounts if any paid_by sub to pay its reorganization expenses and all redemptions and distributions except for regular normal dividends made by sub immediately preceding the sub reorganization will be included as assets of sub held immediately prior to the sub reorganization 3o distributing has no plan or intention to sell or otherwise dispose_of any of the assets of sub deemed acquired in the sub reorganization except for dispositions made in the ordinary course of business or transfers described in sec_368 or sec_1_368-2 plr-112342-13 3p for u s federal_income_tax purposes sub will be deemed to distribute the stock securities and other_property it receives or is deemed to receive in the sub reorganization and its other properties in pursuance of the plan_of_reorganization 3q 3r 3s 3t the liabilities of sub deemed to be assumed as described in sec_357 by distributing were incurred by sub in the ordinary course of its business and are associated with the assets deemed transferred to distributing distributing either directly or through one or more members of distributing 1's qualified_group within the meaning of sec_1 d ii will continue one of the historic businesses of sub or use a significant portion of sub 7's historic_business_assets in a business there is no intercorporate indebtedness existing between distributing and sub that was issued acquired or will be settled at a discount the total fair_market_value of the assets deemed transferred to distributing in the sub reorganization will exceed the sum of i the amount of any liabilities assumed as described in sec_357 by distributing in the exchange and ii the amount of any liabilities owed to distributing by sub that are discharged or extinguished in connection with the sub reorganization the fair_market_value of the assets of distributing will exceed the amount of its liabilities immediately after the sub reorganization 3u sub is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 3v no party to the sub reorganization is an investment_company as defined in sec_368 and iv 3w items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations as a result of the sub reorganization see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d the contribution and internal distribution 3x the total adjusted bases and fair_market_value of the assets to be transferred to controlled by distributing will each equal or exceed the sum of i the liabilities assumed as determined under sec_357 by plr-112342-13 3y 3z controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors and or shareholders in connection with the reorganization the liabilities assumed if any as determined under sec_357 by controlled will be incurred in the ordinary course of business and will be associated with the assets transferred the total fair_market_value of the assets transferred to controlled by distributing in the contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the exchange and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the exchange 4a the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately_after_the_exchange 4b any money property or stock contributed by distributing to controlled in the contribution will be exchanged solely for stock_or_securities if any in controlled and the cash amount 4c no party to internal distribution will be an investment_company as defined in sec_368 and iv 4d no part of the consideration to be distributed by distributing in internal distribution will be received by distributing for u s federal_income_tax purposes as a creditor employee or in any capacity other than that of a shareholder of distributing the distribution of controlled stock to distributing in internal distribution is with respect to distributing 2’s ownership of distributing stock 4e distributing and controlled will treat all members of their respective sags as defined in sec_355 as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied 4f the five years of financial information submitted on behalf of business c conducted by the distributing sag is representative of the present business operations of business c conducted by the distributing sag plr-112342-13 and with regard to business c there have been no substantial operational changes since the date of the last financial statements submitted 4g the five years of financial information submitted on behalf business d as conducted by the controlled sag is representative of the present business operations of business d conducted by the controlled sag and with regard to business d there have been no substantial operational changes since the date of the last financial statements submitted 4h following internal distribution distributing will continue the active_conduct of business c independently and with its separate employees 4i 4j 4k 4l following internal distribution controlled will continue the active_conduct of business d independently and with its separate employees the distributing sag neither acquired_business c nor control of any entity conducting that business was acquired during the five-year period ending on the date of internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part the controlled sag neither acquired_business d nor control of any entity conducting that business was acquired during the five-year period ending on the date of internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part internal distribution will be carried out for the purpose of facilitating the external distribution and is motivated in whole or substantial part by this corporate business_purpose 4m internal distribution will not be used principally as a device for distributing the earnings_and_profits of distributing or controlled or both 4n for purposes of sec_355 immediately after internal distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of internal distribution 4o for purposes of sec_355 immediately after internal distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the plr-112342-13 total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of internal distribution or ii attributable to distributions on distributing 1's stock_or_securities that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of internal distribution internal distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor to any such corporation following internal distribution no person will hold a greater than percent interest in either distributing or controlled within the meaning of g who did not hold such an interest immediately before internal distribution no intercorporate debt will exist between distributing and controlled at the time of or subsequent to internal distribution except that distributing may owe controlled or controlled may owe distributing amounts payable under the continuing agreements any such indebtedness owed by controlled to distributing on completion of internal distribution will not constitute stock_or_securities 4p 4q 4r 4s except as set forth in the continuing agreements payments made in connection with all continuing transactions following the proposed transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length 4t except as otherwise provided herein or in the continuing agreements distributing and controlled will each pay its own expenses if any incurred in connection with the contribution and internal distribution 4u distributing will neither accumulate its receivables nor make extraordinary payment of its payables in anticipation of the distribution 4v no property will be transferred by distributing to controlled for which an investment_credit allowed under sec_46 has been or will be claimed plr-112342-13 4w immediately before internal distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further any excess_loss_account distributing may have in the stock of controlled or a member may have in the stock of another member that is required to be taken into account by sec_1_1502-19 will be included in income immediately before internal distribution to the extent required by treasury regulations see sec_1_1502-19 4x distributing will not have been a u s real_property holding corporation as defined in sec_897 at any time during the five-year period ending on the date of internal distribution 4y distributing will not be a u s real_property holding corporation immediately after internal distribution 4z within p months of the external distribution the cash amount will be distributed up the chain of ownership from distributing to distributing distributing will use the entire cash amount to repay or redeem outstanding indebtedness of the distributing consolidated_group and or make distributions to shareholders of distributing pursuant to the plan_of_reorganization internal distributions the following representations are made with respect to the each of internal distribution internal distribution and internal distribution each of the distributions is referred to as an internal distribution and the corporation that distributes the stock of controlled in an internal distribution is referred to as the distributing_corporation 5a no part of the consideration to be distributed in each internal distribution will be received by the distributing corporation's shareholder as a creditor employee or in any capacity other than that of a shareholder the distribution of controlled stock to distributing corporation’s shareholder in an internal distribution is with respect to its ownership of the distributing corporation’s stock 5b the distributing_corporation and controlled will treat all members of their respective sags as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied plr-112342-13 5c the distributing_corporation sag neither acquired_business c nor acquired control of an entity conducting business c during the five-year period ending on the date of each internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part throughout the five-year period ending on the date of each internal distribution the distributing_corporation sag has been the principal_owner of the goodwill and significant assets of business c and will continue to be the principal_owner following the internal distribution 5d the controlled sag neither acquired_business d nor acquired control of an entity conducting business d during the five-year period that will end on the date of each internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part throughout the five-year period ending on the date of each internal distribution the controlled sag has been the principal_owner of the goodwill and significant assets of business d and will continue to be the principal_owner following the internal distribution 5e each internal distribution is being carried out for purposes of facilitating the external distribution and is motivated in whole or substantial part by this corporate business purposes 5f 5g no internal distribution is being used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or controlled immediately after each internal distribution i any person that holds a percent or greater interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 will have held such an interest in such corporation immediately before the transaction or ii neither the distributing_corporation nor controlled is or will be a disqualified_investment_corporation for purposes of sec_355 5h for purposes of sec_355 immediately after each internal distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of stock of the distributing_corporation entitled to vote or percent or more of the total value of shares of all classes of stock of the distributing_corporation that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the internal distribution plr-112342-13 5i for purposes of sec_355 immediately after each internal distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the internal distribution or ii attributable to distributions on the distributing corporation's stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the internal distribution 5j each internal distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in the distributing_corporation or controlled including any predecessor or successor to any such corporation 5k except as otherwise provided herein or in the continuing agreements the distributing_corporation and controlled will each pay its own expenses if any incurred in connection with the each internal distribution 5l except as set forth in the continuing agreements payments made in connection with all continuing transactions following the proposed transactions between the distributing_corporation and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length 5m no distributing_corporation will have been a u s real_property holding corporation as defined in sec_897 at any time during the five- year period ending on the date of each internal distribution 5n no distributing_corporation will be a u s real_property holding corporation immediately after each internal distribution 5o immediately before each internal distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further any excess_loss_account the distributing_corporation may have in the stock of controlled or a member may have in the stock of another member that is required to be taken into plr-112342-13 account by sec_1_1502-19 will be included in income immediately before each internal distribution to the extent required by treasury regulations see sec_1_1502-19 5p no intercorporate debt will exist between the distributing_corporation and controlled at the time of or subsequent to each internal distribution except that the distributing_corporation may owe controlled or controlled may owe the distributing_corporation amounts payable under the continuing agreements any such indebtedness owed by controlled to the distributing_corporation on completion of internal distribution will not constitute stock_or_securities the external distribution 5q 5r the indebtedness owed by controlled to distributing after the external distribution if any will not constitute stock_or_securities the fair_market_value of the controlled common_stock to be received by each shareholder of distributing pursuant to the external distribution will be approximately equal to the fair_market_value of the distributing common_stock surrendered by the shareholder in the exchange 5s no part of the consideration to be distributed in the external distribution will be received by any shareholder of distributing as a creditor employee or in any capacity other than that of a shareholder of distributing the distribution of controlled stock to distributing’s shareholders in the external distribution is with respect to their ownership of distributing stock 5t distributing and controlled will treat all members of their respective sags as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied 5u the five years of financial information submitted on behalf of business c conducted by the distributing sag is representative of the present business operations of business c conducted by the distributing sag and with regard to business c there have been no substantial operational changes since the date of the last financial statements submitted 5v the five years of financial information submitted on behalf of business d conducted by the controlled sag is representative of the present business operations of business d conducted by the controlled sag and with regard to business d there have been no substantial operational changes since the date of the last financial statements submitted plr-112342-13 5w the distributing sag neither acquired_business d nor acquired control of an entity conducting business d during the five-year period ending on the date of the external distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part throughout the five-year period ending on the date of the external distribution the distributing sag has been the principal_owner of the goodwill and significant assets of business d and will continue to be the principal_owner following the external distribution 5x 5y the controlled sag neither acquired_business d nor acquired control of an entity conducting business d during the five-year period that will end on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part throughout the five-year period ending on the date of the distribution the controlled sag has been the principal_owner of the goodwill and significant assets of business d and will continue to be the principal_owner following the distribution following the external distribution and except as contemplated by the transition service agreement the distributing sag will continue the active_conduct of business c independently and with its separate employees and the controlled sag will conduct the active_conduct of business d independently and with its separate employees 5z the external distribution is being carried out for and is motivated by the corporate business_purpose 6a the external distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled 6b 6c immediately after the external distribution i any person that holds a percent or greater interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 will have held such an interest in such corporation immediately before the transaction or ii neither distributing nor controlled is or will be a disqualified_investment_corporation for purposes of sec_355 for purposes of sec_355 immediately after the external distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of stock of distributing entitled to vote or percent or more of the total value of shares of all classes of stock of distributing that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the external distribution plr-112342-13 6d for purposes of sec_355 immediately after the external distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the external distribution or ii attributable to distributions on distributing's stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the external distribution 6e the external distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation 6f no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the external distribution except for payables arising under the continuing agreements or indebtedness otherwise arising in the ordinary course of business 6g distributing will not have been a u s real_property holding corporation as defined in sec_897 at any time during the five-year period ending on the date of the external distribution 6h distributing will not be a u s real_property holding corporation immediately after the external distribution 6i immediately before the external distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d any excess_loss_account distributing may have in the controlled stock or a member may have in the stock of another member that is required to be taken into account by sec_1_1502-19 will be included in income immediately before the external distribution to the extent required by the regulations sec_1_1502-19 plr-112342-13 6j except as set forth in the continuing agreements payments made in connection with all continuing transactions following the proposed transactions between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length 6k except as otherwise provided herein or in the continuing agreements distributing controlled and the shareholders of distributing will pay their respective expenses if any incurred in connection with the external distribution rulings based solely on the information submitted and the representations set forth above and provided that i the distribution of the stock in each applicable controlled_corporation to each applicable distributing corporation’s shareholders in each distribution is with respect to the distributing corporation’s shareholders’ ownership of stock in the distributing_corporation ii any money property or stock contributed by distributing to controlled in the contribution is exchanged solely for stock_or_securities if any in controlled and the cash amount and iii any other transfers of stock money or property between a distributing_corporation a controlled_corporation or any distributing_corporation shareholder and any person related to a distributing_corporation a controlled_corporation or any distributing_corporation shareholder is respected as a separate transaction for u s federal_income_tax purposes we rule as follows the sub reorganization for u s federal_income_tax purposes the sub reorganization will be treated as the transfer by sub of all of its assets subject_to liabilities to newco in exchange for stock of newco followed by the distribution by sub of the newco stock to its shareholder in liquidation and will constitute a reorganization within the meaning of sec_368 revrul_67_274 1967_2_cb_141 newco and sub will each be a party to the reorganization within the meaning of sec_368 sub will recognize no gain_or_loss upon the transfer of all of its assets to newco in exchange for newco stock and newco’s assumption of sub 3's liabilities sec_361 and sec_357 sub will recognize no gain on the distribution of newco stock to distributing sec_361 newco will recognize no gain_or_loss upon its receipt of sub 3's assets sec_1032 plr-112342-13 newco's basis in the assets acquired from sub will be the same as sub 3's basis in such assets immediately before the sub reorganization sec_362 newco's holding_period for the assets acquired from sub will include the period during which sub held such assets sec_1223 distributing will recognize no gain_or_loss upon the receipt of the stock of newco in exchange for the stock of sub sec_354 the basis of the newco stock in the hands of distributing will be equal to the basis of the sub stock surrendered in exchange therefor sec_358 the holding_period for the newco stock in the hands of the distributing will include the period during which distributing held the sub stock exchanged therefor provided that the sub stock is held as a capital_asset in the hands of distributing on the date of the exchange sec_1223 as provided by sec_381 newco will succeed to the tax_attributes of sub enumerated in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 the fsub distribution fsub will recognize no gain_or_loss upon the fsub distribution sec_355 fsub will recognize no gain_or_loss and no amount will otherwise be included in its income upon receipt of the fsub stock in the fsub distribution sec_355 the basis of the stock of fsub and fsub in the hands of fsub after the fsub distribution will be the same as the basis of the fsub stock held immediately before the fsub distribution allocated in proportion to the fair_market_value of fsub and fsub in accordance with sec_358 and sec_1_358-2 sec_358 and c fsub 1's holding_period in the fsub stock received will include the holding_period of the fsub stock with respect to which the distribution of the fsub stock is made provided that the fsub stock is held as a capital_asset on the date of the fsub distribution sec_1223 plr-112342-13 fsub 2’s earnings_and_profits if any will be adjusted and fsub 3’s earnings_and_profits will be determined in accordance with sec_312 and sec_1_312-10 the fsub distribution will be a distribution to which sec_1_367_b_-1 -5 a -5 c and -5 f apply if fsub 1’s post distribution amount as defined in sec_1_367_b_-5 with respect to fsub or fsub is less than its pre-distribution amount as defined in sec_1_367_b_-5 with respect to fsub or fsub fsub 1’s basis in such stock immediately after the distribution must be reduced by the amount of the difference fsub 1’s basis in such stock however must not be reduced below zero and to the extent the foregoing reduction would reduce its basis below zero fsub must instead include such amount in income as a deemed_dividend from such corporation if fsub reduces the basis in the stock of fsub or fsub or has an inclusion with respect to such stock fsub must increase its basis in the stock of the other corporation to the extent provided in sec_1 b - c the fsub distribution fsub will recognize no gain_or_loss on the fsub distribution sec_355 sub will recognize no gain_or_loss and no amount will otherwise be included in its income upon receipt of the fsub stock in the fsub distribution sec_355 the basis of the stock of fsub and fsub in the hands of sub after the fsub distribution will be the same as the basis of the fsub stock held immediately before the fsub distribution allocated in proportion to the fair_market_value of fsub and fsub in accordance with sec_358 and sec_1_358-2 sec_358 and c sub 2's holding_period in the fsub stock received will include the holding_period of the fsub stock with respect to which the distribution of the fsub stock is made provided that the fsub stock is held as a capital_asset on the date of the fsub distribution sec_1223 fsub 1’s earnings_and_profits if any will be adjusted and fsub 3’s earning and profits will be determined in accordance with sec_312 and sec_1_312-10 plr-112342-13 the fsub distribution will be a distribution to which sec_1_367_b_-1 -5 a -5 c and -5 f apply if sub 2’s post distribution amount as defined in sec_1_367_b_-5 with respect to fsub or fsub is less than its pre-distribution amount as defined in sec_1_367_b_-5 with respect to fsub or fsub sub 2's basis in such stock immediately after the distribution must be reduced by the amount of the difference sub 2's basis in such stock however must not be reduced below zero and to the extent the foregoing reduction would reduce its basis below zero sub must instead include such amount in income as a deemed_dividend from such corporation if sub reduces the basis in the stock of fsub or fsub or has an inclusion with respect to such stock sub must increase its basis in the stock of the other corporation to the extent provided in sec_1 b - c the sub liquidation for u s federal_income_tax purposes the sub liquidation will be treated as a transfer by sub of all of its assets to distributing and an assumption of all the liabilities of sub by distributing in complete cancellation of all the stock of sub the sub liquidation will qualify as a complete_liquidation under sec_332 sec_332 and sec_1_332-2 distributing will recognize no gain_or_loss on the receipt of sub 4's assets and the assumption of sub 4's liabilities sec_332 sub will recognize no gain_or_loss on the distribution of its assets to and the assumption of its liabilities by distributing sec_336 and sec_337 distributing 1's basis in each asset received from sub in the sub liquidation will be the same as the basis of that asset in the hands of sub immediately before the sub liquidation sec_334 distributing 1's holding_period in each asset received from sub in the sub liquidation will include the period during which sub held that asset sec_1223 distributing will succeed to and take into account as of the close of the effective date of the sub liquidation the items of sub described in sec_381 subject_to the conditions and limitations specified in plr-112342-13 sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 the excess_loss_account if any of distributing with respect to the stock of sub will not be recognized as a result of the sub liquidation the sub exchange sub will recognize no gain_or_loss on the sub exchange sec_355 distributing will recognize no gain_or_loss and no amount will otherwise be included in its income upon receipt of the fsub stock in the sub exchange sec_355 the basis of the stock of sub and fsub in the hands of distributing after the sub exchange will be the same as the basis of the sub stock held immediately before the sub exchange allocated in proportion to the fair_market_value of sub and fsub in accordance with sec_358 and sec_1_358-2 sec_358 and c distributing 1’ holding_period in the fsub stock received in the sub exchange will include distributing 1's and sub 4's holding_period in its sub stock surrendered in exchange therefor provided the shares of sub stock are held as a capital_asset by distributing on the date of the sub exchange sec_1223 sub 2’s earnings_and_profits if any will be adjusted and fsub 3’s earnings_and_profits will be determined in accordance with sec_312 and sec_1_312-10 the sub reorganization for u s federal_income_tax purposes the sub reorganization will be treated as a transfer by sub of substantially_all of its assets to distributing solely in exchange for distributing voting_stock and the assumption of the liabilities of sub followed by the distribution by sub of the distributing voting_stock to distributing in complete_liquidation of sub the sub reorganization will qualify as a reorganization under sec_368 and will not be disqualified by reason of the subsequent transfers set forth in the proposed transactions see sections plr-112342-13 a c a c sec_1_368-1 and sec_1_368-2 revrul_69_617 1969_2_cb_57 revrul_85_197 1985_2_cb_120 distributing and sub will each be a_party_to_a_reorganization within the meaning of sec_368 sub will recognize no gain_or_loss on the transfer of substantially_all of its assets to distributing solely in exchange for distributing voting_stock and the assumption by distributing of the liabilities of sub sec_361 and sec_357 sub will recognize no gain_or_loss on the distribution of distributing voting_stock to distributing sec_361 distributing will recognize no gain_or_loss on the receipt of sub 7's assets solely in exchange for distributing voting_stock sec_1032 distributing will recognize no gain_or_loss upon the receipt of distributing stock solely in exchange for sub stock sec_354 distributing 1’s basis in each of the assets of sub received in the sub reorganization will be the same as the basis of such asset in the hands of sub immediately prior to the sub reorganization sec_362 the holding_period of each of the assets of sub in the hands of distributing will include the period during which sub held such asset sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 the contribution and internal distribution for u s federal_income_tax purposes the transactions that comprise the contribution and internal distribution will be treated as a a transfer by distributing to controlled of all distributing 1's assets relating to business b including the stock of fsub the interests in sub llc and the stock of newco in exchange for controlled stock and the assumption of any liabilities relating to business b and b a distribution by distributing of all the controlled stock to its sole shareholder distributing plr-112342-13 the contribution followed by internal distribution will be a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss upon the contribution sec_361 sec_361 sec_361 and sec_357 controlled will recognize no gain_or_loss upon the contribution sec_1032 controlled's basis in each of the assets received pursuant to the contribution will be equal to the basis of the asset in the hands of distributing immediately prior to the contribution sec_362 controlled's holding_period in each of the assets received pursuant to the contribution will include the period during which distributing held such asset sec_1223 distributing will recognize no gain_or_loss upon internal distribution sec_361 distributing will recognize no gain_or_loss and no amount will be otherwise included in its income upon the receipt of controlled stock in internal distribution sec_355 the basis of the stock of distributing and controlled in the hands of distributing after internal distribution will be the same as the basis of the distributing stock held immediately before the internal distribution allocated in proportion to the fair_market_value of distributing and controlled in accordance with sec_358 and sec_1_358-2 sec_358 and c distributing 2’s holding_period in the controlled stock will include the holding_period of the distributing shares distributing held with respect to which internal distribution is made provided the distributing stock was held as a capital_asset on the date of internal distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 distributing will recognize no gain_or_loss upon receipt of the cash amount from controlled provided the conditions set forth in plr-112342-13 representation 4z above are satisfied and provided none of the cash amount is used to retire debt of the distributing consolidated_group that was issued in anticipation of the proposed transactions sec_361 and b following internal distribution controlled will not be a successor ofdistributing for purposes of sec_1504 internal distributions the following rulings are provided with respect to each of internal distribution internal distribution and internal distribution each of the distributions is referred to as an internal distribution and the corporation that distributes the stock of controlled in an internal distribution is referred to as the distributing_corporation each distributing_corporation shareholder that receives controlled stock in an internal distribution is referred to as distributing_corporation shareholder distributing_corporation will recognize no gain_or_loss upon the internal distribution sec_355 distributing_corporation shareholder will recognize no gain_or_loss and no amount will otherwise be included in its income upon receipt of the controlled stock in internal distribution sec_355 the basis of the stock of distributing_corporation and controlled in the hands of distributing_corporation shareholder after the internal distribution will be the same as the basis of the distributing_corporation stock held immediately before the internal distribution allocated in proportion to the fair_market_value of distributing_corporation and controlled in accordance with sec_358 and sec_1_358-2 sec_358 and c distributing_corporation shareholder's holding_period in the controlled stock received will include the holding_period of the distributing_corporation common_stock with respect to which the distribution of the controlled stock is made provided that the distributing_corporation common_stock is held as a capital_asset on the date of internal distribution sec_1223 distributing corporation’s earnings_and_profits if any will be adjusted and controlled’s earnings_and_profits will be determined in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 plr-112342-13 the external distribution distributing will recognize no gain_or_loss upon the external distribution sec_355 distributing’s shareholders will recognize no gain_or_loss and no amount will otherwise be included in their income upon receipt of the controlled stock in the external distribution sec_355 the basis of the stock of distributing and controlled in the hands of distributing’s shareholders after the external distribution including any fractional share interest in controlled stock to which the shareholder may be entitled will be the same as the basis of the distributing stock held immediately before the external distribution allocated in proportion to the fair_market_value of distributing and controlled in accordance with sec_358 and sec_1_358-2 sec_358 and c each distributing shareholder’s holding_period in the controlled stock received in the external distribution including any fractional share interest in controlled stock to which the shareholder may be entitled will include such shareholders' holding_period in its distributing common_stock with respect to which such controlled stock is distributed or for which such controlled stock is exchanged provided the shares of distributing common_stock are held as a capital_asset by such holder on the date of the external spin sec_1223 a shareholder who receives cash in lieu of fractional shares of controlled stock will recognize gain_or_loss measured by the difference between the basis of such fractional share interest and the amount of cash received therefor revproc_77_41 1977_2_cb_574 provided the fractional share interest is a capital_asset in the hands of the shareholder on the date of the external distribution any gain_or_loss will constitute capital_gain or loss sec_1221 and sec_1222 distributing’s earnings_and_profits if any will be adjusted and controlled’s earnings_and_profits will be determined in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 immediately following the time at which distributing has distributed stock constituting control within the meaning of sec_368 pursuant to the steps comprising the external distribution except for purposes of sec_355 any payments made between any of distributing and controlled and their respective affiliates under any of the continuing agreements regarding liabilities indemnities or other plr-112342-13 obligations that a have arisen or will arise for a taxable_period ending on or before the external distribution and b will not become fixed and ascertainable until after the contribution will be viewed as occurring before the contribution cf 344_us_6 tax character of later transaction will derive from earlier related transaction revrul_83_73 1983_1_cb_84 caveats this letter only addresses issues under the jurisdictions of cc corp corporate and cc intl international a separate letter may be issued subsequently addressing issues under the jurisdiction of cc fip financial institutions and products 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 no opinion is expressed about the tax treatment of the proposed transactions under other provisions including the international provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transactions that are not specifically covered by the above rulings in particular this office has not reviewed any information pertaining to and has made no determination regarding i ii iii iv whether any of the distributions or foreign distributions satisfy the business_purpose requirement of sec_1_355-2 whether any of the distributions or foreign distribution are used principally as a device for the distribution of earnings_and_profits of any distributing_corporation or controlled_corporation or combination thereof see sec_355 and sec_1_355-2 whether any of the distributions or foreign distribution are part of a plan or a series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in any distributing_corporation or any controlled_corporation see sec_355 and sec_1_355-7 the u s federal_income_tax consequences of steps i ii and vi of the proposed transactions distributing’s payment of expenses on behalf of its affiliates or the continuing agreements procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-112342-13 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely _douglas c bates______________ douglas c bates senior technician reviewer branch office of associate chief_counsel corporate


department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number ---------------------- refer reply to cc ita b02 plr-106585-19 date august internal_revenue_service number release date index number -------------------------------------------- ------------------------ --------------------------------- in re -------------------------------------- ty taxable_year ending -------------------------- legend taxpayer --------------------------------------- a ------------------------------------------ date1 -------------------------------- dear ------------------------------- this is in response to a letter dated date in which taxpayers are requesting consent to revoke their election under sec_163 of the internal_revenue_code to treat a certain amount of qualified_dividend_income as investment_income for ty in addition taxpayers are requesting an extension of time to make a late election to treat a lesser amount of qualified dividends as investment_income under sec_163 for ty this request is made in accordance with sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts and representations taxpayers are individuals who file their federal_income_tax returns using the filing_status of married_filing_jointly taxpayers use the cash_method_of_accounting and use the calendar_year as their taxable_year plr-106585-19 taxpayers filed form_1040 individual_income_tax_return for ty on form_4952 attached to form_1040 taxpayers elected to treat a certain amount of qualified_dividend_income as investment_income for purposes of the investment_interest expense deduction taxpayer made the decision to elect to include that certain amount of qualified_dividend_income as investment_income based upon information received on a schedule_k-1 from a on date1 a issued an amended schedule_k-1 to taxpayers for ty showing a decrease in the amount of ordinary and qualified dividends the revisions in the schedule_k-1 have a substantial impact on taxpayers’ tax calculations therefore taxpayers are requesting consent to revoke their election under sec_163 to treat a certain amount of qualified_dividend_income as investment_income for ty in addition taxpayers are requesting an extension of time to make a late election to treat a lesser amount of qualified dividends as investment_income under sec_163 for ty law and analysis sec_163 provides that in the case of a taxpayer other than a corporation the amount allowed as a deduction for investment_interest for any taxable_year shall not exceed the net_investment_income of the taxpayer for the taxable_year sec_163 provides that net_investment_income means the excess of investment_income over investment_expenses sec_163 defines investment_income sec_163 states that investment_income shall include qualified_dividend_income only to the extent the taxpayer elects to treat such income as investment_income for purposes of this subsection sec_1_163_d_-1 provides that as a consequence the qualified_dividend_income taken into account as investment_income is not eligible to be taxed at the favorable capital_gain rate sec_1_163_d_-1 provides that the election to treat qualified_dividend_income as investment_income must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the income is recognized sec_1_163_d_-1 provides that the election to treat qualified_dividend_income as investment_income is revocable with the consent of the commissioner sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-106585-19 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make certain regulatory elections sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides that requests for extensions of time for regulatory elections under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that in general a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election sec_301_9100-3 provides that a taxpayer is deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section sec_301_9100-3 provides special rules for accounting_method regulatory elections sec_301_9100-3 provides that the interests of the government are deemed prejudiced except in unusual or compelling circumstances if the accounting_method regulatory election for which relief is requested is subject_to the advance plr-106585-19 consent procedures for method changes requires a sec_481 adjustment would permit a change from an impermissible method_of_accounting that is an issue under consideration by examination or any other setting or provides a more favorable method_of_accounting if the election is made by a certain date or taxable_year taxpayer’s election is a regulatory election as defined in sec_301_9100-1 because the due_date of the election is prescribed in sec_1_163_d_-1 of the income_tax regulations the commissioner has the authority under sec_301_9100-1 and sec_301 to permit taxpayer to revoke a regulatory election and to grant an extension of time to file a late regulatory election conclusion based upon our analysis of the facts and representations provided taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government therefore the requirements of sec_301_9100-1 and sec_301_9100-3 have been met pursuant to sec_1_163_d_-1 taxpayers are granted consent to revoke their election under sec_163 to treat a certain amount of qualified_dividend_income as investment_income for ty taxpayers are granted an extension of days from the date of this letter to make a late election to treat a lesser amount of qualified dividends as investment_income for ty caveats the rulings contained in this letter are based on information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination 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 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively a taxpayer filing its return electronically may satisfy this requirement by attaching a statement to its return that provides the date and control number of the letter_ruling in accordance with the provisions of the power_of_attorney currently on file with this office a copy of this letter is being sent to your authorized representative we are also sending a copy of this letter to the appropriate operating division director plr-106585-19 enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours _______________________________ david b silber acting senior technician reviewer branch office of associate chief_counsel income_tax accounting enclosure copy for sec_6110 purposes cc


internal_revenue_service number release date index numbers ----------------------------------------- -------------------- ----------------------------- ----------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-121003-17 date date legend x ----------------------- ---------------------------------------------------- d1 d2 country ------------------------ ----------------- ----------------------- dear -------------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a foreign disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d2 however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes x represents that it acted reasonably and in good_faith and that the interests of the government will not be prejudiced by granting relief x further represents that no hindsight is involved in seeking the relief requested plr-121003-17 law and analysis sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d2 x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form this ruling is contingent on the owners of x filing within days of this letter all required returns for all open years consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms plr-121003-17 return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter_ruling should be attached to any such returns 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 sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely holly porter associate chief_counsel passthroughs special industries joy c spies by _____________________________ joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes