internal_revenue_service number release date index number ------------------- ------------------------- -------------------------- -------------------------- --------------------------------- 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 b03 plr-109568-11 date date legend parent sub sub sub sub sub sub sub sub sub ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------- -- -------------------------- ----------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------- ----------------------- --------------------------------------------------- --------------------------------- ----------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------------------------------- ----------------------- plr-109568-11 sub sub dre1 dre dre dre dre dre -------------------------------------------------- -------------- ----------------------------------------------------------------------------------------------- ----------------------- ------------------------------------------------------ ----------------------------------------------------------------------------------------------- ----------------------- --------------------------- -------------------------------------------- -------------------------------------------- state a ------------- country a ----------- country b ------------- business a ----------------------------------------------------------------------------------------------- ----------------------------------------- business b ------------------------------------------------------------------- business c ---------------------------------------------------------------------------- a b ---------------- ------------ year ------- dear ----------- this letter responds to your request dated date submitted by your authorized representative on behalf of parent and its affiliates for rulings on certain federal_income_tax consequences of a series of transactions collectively the completed and proposed transactions the information submitted in that request and subsequent correspondence is summarized below plr-109568-11 summary of facts parent is a publicly traded domestic_corporation incorporated in state a parent an accrual_method taxpayer is a holding_company and the common parent of a consolidated_group parent owns all of the issued and outstanding_stock of sub an entity incorporated in state a sub is engaged in business a it is anticipated that parent will sell sub prior to the distribution as defined below parent owns all of the issued and outstanding_stock of sub an entity incorporated in state a sub owns all of the issued and outstanding_stock of sub and sub which are both incorporated in state a sub is engaged in business b parent owns all of the issued and outstanding interests in dre a domestic entity disregarded as an entity separate from its owner for u s federal tax purposes dre owns all of the issued and outstanding_stock of sub an entity incorporated in state a sub is engaged in business c dre also owns all of the issued and outstanding interests of dre a domestic entity disregarded as an entity separate from its owner for u s federal tax purposes dre owns all of the issued and outstanding interests in dre a domestic entity disregarded as an entity separate from its owner for u s federal tax purposes parent also owns all of the issued and outstanding_stock of sub an entity incorporated in state a sub an entity incorporated in country a that is a controlled_foreign_corporation cfc within the meaning of sec_957 and sub an entity incorporated in country b that is a cfc within the meaning of sec_957 following the completed and proposed transactions it is anticipated that parent will continue to conduct business b through its subsidiaries and sub after its conversion from dre pursuant to step below will conduct business c through its subsidiaries before completion of the proposed transaction parent and sub or dre will enter into agreements that will govern the allocation of various items including tax benefits and liabilities economically attributable to taxable periods ending before or beginning before and ending on or after the date of the distribution and become fixed and ascertainable after that date in addition parent and sub or dre will enter into a customary transition services agreement pursuant to which the parent group and the sub group may provide various administrative and similar services to each other for transitional periods the two groups will compensate each other for any services so provided on an arm’s length basis including reimbursement of costs as appropriate plr-109568-11 parent and its affiliates propose to enter into the following transactions to separate business b and business c completed transaction dre elected to be treated as an association_taxable_as_a_corporation for u s federal tax purposes under sec_301_7701-3 dre following such election is referred to herein as sub this step of the transaction will be referred to as the sub incorporation proposed transaction parent will contribute all of the stock of sub and sub and any other assets associated with business c to dre and dre will assume from parent any liabilities associated with business c certain of the asset transfers or liability assumptions may occur after the conversion of dre to sub in step below sub will convert under state a law to a limited_liability_company will be treated as an entity disregarded as an entity separate from its owner for u s federal tax purposes and will be known thereafter as dre this step of the transaction will be referred to as liquidation sub will convert under state a law to a limited_liability_company will be treated as an entity disregarded as an entity separate from its owner for u s federal tax purposes and will be known thereafter as dre this step of the transaction will be referred to as liquidation dre will convert under state a law to a corporation and be known as sub sub will be an accrual_method taxpayer sub maintains a short-term intercompany account with parent as part of the proposed transaction parent will contribute the sub receivable to sub parent will contribute all of the stock of sub to sub in exchange for additional shares of sub stock immediately after which sub will convert under state a law to a limited_liability_company will be treated as an entity disregarded as an entity separate from its owner for u s federal tax purposes and will be known thereafter as dre this step of the transaction will be referred to as the sub reorganization sub will issue additional shares to parent in order for the total outstanding shares of sub to be equal to the number of shares to be distributed in the distribution plr-109568-11 sub will borrow approximately dollar_figurea to dollar_figureb from a third-party lender pursuant to a short term note the short-term debt and distribute the cash to parent parent will guarantee sub 10’s obligations under the short-term debt the guarantee in exchange for an arm’s length guarantee fee the asset transfers and liability assumptions that occur after the conversion of dre as described in step above step sec_5 and above and this step other than the guarantee fee will be referred to collectively as the contribution parent will distribute the stock of sub pro_rata to parent’s shareholders this step of the transaction will be referred to as the distribution parent will not distribute fractional shares of sub stock in the distribution but will transfer any such interest on behalf of the parent shareholders to a distribution agent the distribution agent will aggregate fractional shares of sub stock into whole shares and sell the whole shares on the open market at prevailing market prices the distribution agent will then distribute the aggregate cash proceeds net of brokerage fees and other costs pro_rata to each distributing shareholder who would otherwise have been entitled to receive a fractional share of sub stock in the distribution immediately after the closing of the distribution sub will refinance the short- term debt with a long-term third-party credit facility and the guarantee will expire parent will form a new corporation under state a law newco and newco will merge with and into parent with parent surviving as a result of the merger parent will change its name to sub parent will transfer the cash received from sub to its creditors in repayment of outstanding debt representations sub incorporation a b no stock_or_securities were issued for services rendered to or for the benefit of sub in connection with the sub incorporation no stock_or_securities were issued for indebtedness of sub that is not evidenced by a security or for interest on indebtedness of sub that accrued on or after the beginning of the holding_period of parent for the debt plr-109568-11 c d e f g h i j k to the extent that any patents patent applications or technical know-how were transferred in the sub incorporation such items qualified as property within the meaning of sec_351 and parent transferred all substantial rights in such patents or patent applications within the meaning of sec_1235 to the extent that any copyrights were transferred in the sub incorporation all rights title and interests for each copyright in each medium of exploitation were transferred to sub to the extent that franchises trademarks or trade names were transferred in the sub incorporation parent did not retain any significant_power_right_or_continuing_interest within the meaning of sec_1253 in the franchises trademarks or trade names none of the stock transferred in the sub incorporation was sec_306 stock within the meaning of sec_306 the transfer is not the result of the solicitation by a promoter broker or investment house parent did not retain any rights in the property transferred to sub the value of the stock received in exchange for accounts_receivable was equal to the net value of the accounts transferred ie the face_amount of the accounts_receivable previously included in income less the amount of the reserve for bad_debts the adjusted_basis of the property transferred by parent to sub equaled or exceeded the sum of the liabilities assumed within the meaning of sec_357 by sub the total fair_market_value of the assets transferred to sub in the sub incorporation exceeded the sum of i the amount of any liabilities assumed within the meaning of sec_357 by sub in the exchange ii the amount of any liabilities owed to sub by parent that were 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 permitted to be received under sec_351 without the recognition of gain received by parent in the exchange the fair_market_value of the assets of sub exceeded the amount of its liabilities immediately after the sub incorporation l the liabilities of parent assumed within the meaning of sec_357 by sub were incurred in the ordinary course of business and were associated with the assets transferred plr-109568-11 m n o p q r s t u v w the aggregate fair_market_value of the property transferred by parent to sub equaled or exceeded parent’s aggregate adjusted_basis in such property no investment_tax_credit determined under sec_46 has been or will be claimed for any property that was transferred by parent to sub pursuant to the sub incorporation there is no indebtedness between sub and parent and there was no indebtedness created in favor of parent as a result of the sub incorporation except for parent’s contribution of sub to sub in step above there is no plan or intention on the part of parent to dispose_of any of the sub stock received in the sub incorporation there is no plan or intention on the part of sub to redeem or otherwise reacquire any stock issued in the sub incorporation taking into account any issuance deemed or otherwise of additional shares of sub stock any issuance of stock for services the exercise of any sub stock_rights warrants or subscriptions a public offering of sub stock and the sale exchange transfer by gift or other_disposition of any of the stock of sub received in the sub incorporation parent will be in control of sub within the meaning of sec_368 there is no plan or intention by sub to dispose_of the transferred property other than in the normal course of business operations sub will remain in existence and will retain and use the property transferred to it in a trade_or_business except for expenses that are solely and directly related within the meaning of revrul_73_54 c b to the sub incorporation all of which will be paid_by parent each of the parties to the sub incorporation will pay its own expenses if any incurred in connection with the sub incorporation sub is not an investment_company within the meaning of sec_351 and sec_1_351-1 parent is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock deemed received in the exchange is not to be used to satisfy the indebtedness of such debtor x sub will not be a personal_service_corporation within the meaning of sec_269a plr-109568-11 liquidation a b c d e f g h i sub on the date of the adoption of the plan of conversion of sub the sub conversion plan date and at all times until liquidation is completed will own percent of the single outstanding class of sub stock no shares of sub stock will have been redeemed during the three years preceding the sub conversion plan date sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the sub conversion plan date no assets of sub have been or will be disposed of by either sub or sub except for i dispositions in the ordinary course of business ii dispositions occurring more than three years prior to the sub conversion plan date and iii dispositions pursuant to the proposed transaction the liquidation of sub will not be preceded or followed by the reincorporation transfer or sale by sub of all or a part of the business_assets of sub to another corporation i that is the alter ego of sub and ii that directly or indirectly will be owned more than percent in value by persons holding directly or indirectly more than percent in value of the stock of sub for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 prior to the sub conversion plan date no assets of sub will have been distributed in_kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to the sub conversion plan date sub will report all earned_income represented by assets that will be distributed to sub such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc the fair_market_value of the assets of sub will exceed its liabilities both at the sub conversion plan date and immediately prior to the effective time of liquidation there is no intercorporate debt existing between sub and sub and none has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the sub conversion plan date plr-109568-11 j k sub is not an organization that is exempt from u s federal_income_tax under sec_501 or any other provision of the code all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to liquidation have been fully disclosed liquidation a b c d e f g parent on the date of adoption of the plan of conversion the sub conversion plan date and at all times until liquidation is completed will own percent of the single outstanding class of sub stock no shares of sub stock will have been redeemed during the three years preceding the sub conversion plan date sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the sub conversion plan date no assets of sub have been or will be disposed of by either sub or parent except for i dispositions in the ordinary course of business ii dispositions occurring more than three years prior to the sub conversion plan date and iii dispositions pursuant to the proposed transaction the liquidation of sub will not be preceded or followed by the reincorporation transfer or sale by parent of all or a part of the business_assets of sub to another corporation i that is the alter ego of sub and ii that directly or indirectly will be owned more than percent in value by persons holding directly or indirectly more than percent in value of the stock of sub for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 prior to the sub conversion plan date no assets of sub will have been distributed in_kind transferred or sold to parent except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to the sub conversion plan date sub will report all earned_income represented by assets that will be distributed to parent such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc plr-109568-11 h i j k the fair_market_value of the assets of sub will exceed its liabilities both at the sub conversion plan date and immediately prior to the effective time of liquidation there is no intercorporate debt existing between sub and parent and none has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the sub conversion plan date and a long-term note payable the basis and issue_price of which are the same from sub to parent arising in year in connection with parent’s acquisition of certain business b assets from a third party parent is not an organization that is exempt from u s federal_income_tax under sec_501 or any other provision of the code all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to liquidation have been fully disclosed sub reorganization a b c d e the fair_market_value of the sub stock received by parent in the sub reorganization will be approximately equal to the fair_market_value of the sub stock surrendered in the exchange sub 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 for purposes of this representation amounts used 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 were included as assets of sub held immediately prior to the sub reorganization at least percent of the proprietary interest in sub will be exchanged for stock of sub and will be preserved within the meaning of sec_1_368-1 there is no plan or intention for sub or any person related as defined in sec_1_368-1 to sub to acquire or redeem any sub stock issued or deemed issued in the sub reorganization either directly or through any transaction agreement or other arrangement with any other person there is no plan or intention by parent to sell exchange or otherwise dispose_of any shares of sub stock except pursuant to the distribution plr-109568-11 f g h i j k l m n sub has no plan or intention to sell or otherwise dispose_of any of the assets of sub acquired in the sub reorganization except for dispositions made in the ordinary course of business the liabilities of sub assumed within the meaning of sec_357 by sub in the sub reorganization will have been incurred by sub in the ordinary course of its business and will be associated with the assets transferred following the sub reorganization sub will continue the historic_business of sub or use a significant portion of sub 3’s historic_business_assets in a business except for expenses that are solely and directly related within the meaning of rev_rul to the sub reorganization all of which will be paid_by parent each of the parties to the sub reorganization will pay its own expenses if any incurred in connection with the sub reorganization at the time of the sub reorganization no intercorporate indebtedness will exist between sub and sub that will have been issued acquired or settled at a discount no two parties to the sub reorganization are investment companies as defined in sec_368 and iv the total fair_market_value of the assets transferred to sub in the sub reorganization will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by sub in the exchange ii the amount of any liabilities owed to sub by sub that are discharged or extinguished in connection with the exchange and iii the amount of any cash and the fair_market_value of any other_property other than the stock permitted to be received under sec_361 without the recognition of gain received by sub in the exchange the fair_market_value of the assets of sub will exceed the amount of sub 10’s liabilities immediately after the sub reorganization sub is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 no property other than the shares of sub voting_stock will be issued by sub to sub as consideration with respect to the sub reorganization plr-109568-11 contribution and distribution a b c d e f g the total adjusted_basis of the assets transferred to sub by parent in the contribution will equal or exceed the sum of i any liabilities assumed within the meaning of sec_357 by sub and ii the total amount of money and the fair_market_value of any other_property within the meaning of sec_361 received by parent from sub and transferred to parent’s shareholders or creditors pursuant to the plan_of_reorganization the total fair_market_value of the assets transferred to sub in the contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by sub in the exchange ii the amount of any liabilities owed to sub by parent 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 permitted to be received under sec_361 without recognition of gain received by parent in the exchange the fair_market_value of the assets of sub will exceed the amount of sub 10’s liabilities immediately after the contribution any liabilities assumed within the meaning of sec_357 by sub in the contribution will have been incurred in the ordinary course of business and will be associated with the assets transferred no investment_tax_credit determined under sec_46 has been or will be claimed for any property that will be transferred by parent to sub pursuant to the contribution no part of the consideration to be distributed by parent in the distribution will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of parent except for expenses that are solely and directly related within the meaning of rev_rul to the distribution all of which will be paid_by parent each of the parties to the distribution will pay its own expenses if any incurred in connection with the distribution the five years of financial information submitted on behalf of business b conducted by the parent separate_affiliated_group within the meaning of sec_355 parent sag is representative of the present business operations of business b conducted by the parent sag and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted plr-109568-11 h i j k l m n the five years of financial information submitted on behalf of business c conducted by the parent sag is representative of the present business operations of business c conducted by the parent sag and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted neither business b nor control of any entity conducting this business was acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized under proposed sec_1_355-3 in whole or in part throughout the five-year period ending on the date of the distribution the parent sag has been the principal_owner of the goodwill and significant assets of business b the parent sag will be the principal_owner of the goodwill and significant assets of business b following the distribution neither business c nor control of an entity conducting this business was acquired during the five-year period ending on the date of the distribution in a transaction in which gain_or_loss was recognized or treated as recognized under proposed sec_1_355-3 in whole or in part throughout the five-year period ending on the date of the distribution the parent sag has been the principal_owner of the goodwill and significant assets of business c the sub sag will be the principal_owner of the goodwill and significant assets of business c following the distribution following the proposed transaction the parent sag will continue the active_conduct of business b independently and with its separate employees following the proposed transaction the sub sag will continue the active_conduct of business c independently and with its separate employees the distribution is not being used principally as a device for the distribution of the earnings_and_profits of parent or sub or both the distribution is being carried out to enable i parent and sub each to adopt a capital structure appropriate to its business to facilitate growth and acquisitions ii the separate management teams and boards of directors of parent and sub to focus on the unique needs of the particular business thereby enabling more effective decision-making and iii parent and sub each to use its stock for incentive compensation to recruit and retain key employees the distribution is motivated in whole or substantial part by one or more of these corporate business purposes o no intercorporate indebtedness will exist between parent and sub at the time of or subsequent to the distribution other than indebtedness that might plr-109568-11 arise in connection with the parent group’s and the sub group’s continued dealings with each other through shared services and similar agreements payments made in connection with all continuing transactions if any between parent and sub will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the transaction are investment companies as defined in sec_368 and iv for purposes of sec_355 immediately after the distribution no person determined after applying the aggregation rules of sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of parent stock entitled to vote or percent or more of the total value of shares of all classes of parent 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 distribution for purposes of sec_355 immediately after the distribution no person determined after applying the aggregation rules of sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of sub stock entitled to vote or percent or more of the total value of shares of all classes of sub 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 distribution or ii attributable to distributions on parent 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 distribution the 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 50-percent_or_greater_interest within the meaning of sec_355 in either parent or sub including any predecessor or successor of parent or sub immediately after the transaction taking into account sec_355 either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of parent or sub who did not hold such an interest immediately before the distribution or ii neither parent nor sub will be a disqualified_investment_corporation within the meaning of sec_355 immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations further parent’s excess_loss_account if any with p q r s t u v plr-109568-11 w x y z respect to its shares of sub stock or any direct or indirect subsidiaries of sub will be included in income immediately before the distribution there are no continuing planned or intended transactions between parent and sub following the proposed transaction either directly or indirectly other than agreements that will govern the allocation of various items including tax benefits and liabilities and services to be provided for a short-term period pursuant to a customary transition services agreement payments made in connection with all continuing transactions if any between parent and sub will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length the receipt by parent shareholders of cash in lieu of fractional shares of sub stock resulting from the open market sale of the fractional shares has been arranged solely for the purpose of avoiding the expense and inconvenience to parent and sub of issuing fractional shares and does not represent separately bargained-for consideration it is intended that the total cash consideration received by the shareholders of parent from the open market sale of their fractional shares will not exceed one percent of the total consideration that will be distributed in the distribution it is also intended that no parent shareholder will receive cash in an amount equal to or greater than the value of one full share of sub common_stock the amount of parent debt to be paid_by parent with cash received from sub in step above will not exceed the weighted quarterly average of the parent debt owed to third parties for the 12-month_period ending on the close of business on the last full business_day before the date on which the parent board_of directors initially discussed the potential separation of sub from parent rulings sub incorporation for u s federal_income_tax purposes the sub incorporation will be treated as if parent contributed all of the assets and liabilities of dre to sub in exchange for stock of sub parent will not recognize any gain_or_loss on the sub incorporation sec_351 and sec_357 sub will not recognize any gain_or_loss on the deemed receipt of assets in exchange for its stock in the sub incorporation sec_1032 plr-109568-11 the basis of each asset deemed received by sub will be the same as the basis of such asset in the hands of parent immediately prior to the sub incorporation sec_362 the basis of the stock deemed received by parent in the sub incorporation will be the same as the basis of the assets deemed transferred by parent to sub decreased by the sum of liabilities assumed by sub sec_358 and d parent’s holding_period in the sub stock deemed received in the sub incorporation will include the holding_period of the sub assets deemed transferred in exchange therefor provided that such assets are held by parent as capital assets on the date of the transfer sec_1223 sub 9’s holding_period in each asset deemed received in the sub incorporation will include the period during which parent held such asset sec_1223 liquidation for u s federal_income_tax purposes liquidation will be treated as if sub distributed all of its assets and liabilities to sub in complete_liquidation of sub under sec_332 no gain_or_loss will be recognized by sub on the deemed receipt of all of the assets and assumption of the liabilities of sub in liquidation sec_332 no gain_or_loss will be recognized by sub on the deemed_distribution of its assets and liabilities to sub in liquidation sec_337 sub 2’s basis in each asset deemed received from sub in liquidation will equal the basis of such asset in the hands of sub immediately before liquidation sec_334 sub 2’s holding_period in each asset deemed received from sub in liquidation will include the period during which such asset was held by sub sec_1223 sub 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 except to the extent sub 6’s earnings_and_profits are reflected in sub 2’s earnings_and_profits sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of plr-109568-11 liquidation sec_381 and sec_1_381_c_2_-1 and sec_1_1502-33 any deficit in the earnings_and_profits of sub can be used only to offset earnings_and_profits accumulated after the date of liquidation sec_381 liquidation for u s federal_income_tax purposes liquidation will be treated as if sub distributed all of its assets and liabilities to parent in complete_liquidation of sub under sec_332 no gain_or_loss will be recognized by parent on the deemed receipt of all of the assets and assumption of the liabilities of sub in liquidation sec_332 no gain_or_loss will be recognized by sub on the deemed_distribution of its assets and liabilities to parent in liquidation sec_337 parent’s basis in each asset deemed received from sub in liquidation will equal the basis of such asset in the hands of sub immediately before liquidation sec_334 parent’s holding_period in each asset deemed received from sub in liquidation will include the period during which such asset was held by sub sec_1223 parent 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 except to the extent sub 2’s earnings_and_profits are reflected in parent’s earnings_and_profits parent will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of liquidation sec_381 and sec_1_381_c_2_-1 and sec_1_1502-33 any deficit in the earnings_and_profits of sub can be used only to offset earnings_and_profits accumulated after the date of liquidation sec_381 sub reorganization for u s federal_income_tax purposes the transfer by parent of all of the stock of sub to sub in exchange for sub stock followed by sub 3’s conversion to dre ie the sub reorganization will be treated as the transfer by sub of all of its assets to sub in exchange for sub stock and the assumption_of_liabilities followed by sub 3’s deemed_distribution of sub stock to parent in complete_liquidation of sub plr-109568-11 the sub reorganization will qualify as a reorganization under sec_368 sub and sub each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by sub on the deemed transfer of all of its assets to sub in exchange for sub stock and sub 10’s deemed assumption of sub 3’s liabilities in the sub reorganization sec_357 and sec_361 no gain_or_loss will be recognized by sub on its deemed receipt of all of sub 3’s assets in exchange for sub stock and sub 10’s deemed assumption of sub 3’s liabilities in the sub reorganization sec_1032 no gain_or_loss will be recognized by sub on its deemed_distribution of the sub stock received in the sub reorganization sec_361 the basis of each asset deemed received by sub in the sub reorganization will equal the basis of such asset in the hands of sub immediately before the sub reorganization sec_362 the holding_period of each asset deemed received by sub in the sub reorganization will include the period during which sub held such asset sec_1223 no gain_or_loss will be recognized by parent on the exchange of its sub stock for sub stock in the sub reorganization sec_354 the basis of the sub stock received by parent will be the same as the basis of the sub stock surrendered in exchange therefor sec_358 the holding_period of the sub stock received by parent in the sub reorganization will include the holding_period of the sub stock surrendered in exchange therefor sec_1223 sub will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in big_number and and the regulations thereunder sec_381 and sec_1_381_a_-1 sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of the sub reorganization sec_381 and sec_1_381_c_2_-1 any deficit in the earnings_and_profits of sub can be used only to offset earnings_and_profits accumulated after the date of the sub reorganization sec_381 plr-109568-11 contribution and distribution the guarantee fee to be paid_by sub to parent as described in step above is not considered a part of the contribution or distribution and any income_or_deduction pursuant to the guarantee fee will be taken into account under general income_tax principles the contribution followed by the distribution will be a reorganization under sec_368 parent and sub each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by parent on the contribution sec_357 and sec_361 and b no gain_or_loss will be recognized by sub on the contribution sec_1032 the basis of each asset received or deemed received by sub in the contribution will equal the basis of such asset in the hands of parent immediately before the contribution sec_362 the holding_period of each asset received or deemed received by sub in the contribution will include the period during which parent held such asset sec_1223 no gain_or_loss will be recognized by and no amount will be included in the income of the shareholders of parent on their receipt of sub shares in the distribution sec_355 no gain_or_loss will be recognized by parent as a result of the distribution sec_361 the aggregate basis of the parent shares and the sub shares in the hands of the shareholders of parent after the distribution will be the same as the basis of the parent shares in the hands of the shareholders of parent immediately before the distribution sec_358 and sec_1_358-1 such basis will be allocated between the parent shares and the sub shares in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 b and c the holding_period of the sub shares received by the shareholders of parent in the distribution will include the holding_period of the parent shares with respect to which the distribution will be made provided that such parent shares are held as capital assets on the date of the distribution sec_1223 plr-109568-11 the receipt by parent shareholders of cash in lieu of fractional shares of sub stock will be treated for u s federal_income_tax purposes as if the fractional shares had been distributed to the parent shareholders as part of the distribution and then had been disposed of by such shareholders for the amount of such cash in a sale_or_exchange the gain_or_loss if any determined using the basis allocated to the fractional shares in contribution and distribution ruling and the holding_period attributed to the fractional shares in contribution and distribution ruling will be treated as a capital_gain or loss provided the fractional share would be a capital_asset in the hands of the selling shareholder sec_1001 as provided in sec_312 proper allocation of earnings_and_profits between parent and sub will be made under sec_1_312-10 and sec_1_1502-33 payments made by parent to sub or vice versa that i have arisen or will arise for a taxable_period ending on or before the distribution or for the taxable_period beginning before and ending after the distribution and ii will not have become fixed and ascertainable until after the distribution will be treated as if occurring immediately before the distribution see 344_us_6 revrul_83_73 c b caveats the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the 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 in particular we express no opinion regarding i whether the distribution satisfies the business_purpose requirements of sec_1_355-2 ii whether the distribution is being used principally as a device for the distribution of the earnings_and_profits of parent sub or both see sec_355 and sec_1_355-2 iii whether the transaction 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 parent or sub see sec_355 and sec_1_355-7 and iv the u s federal tax consequences of step of the proposed transaction plr-109568-11 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives 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 ________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number ---------------------------------------- ----------------------------------------------- ----------------------------- ----------------------- in re ---------------------------------------- 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 intl b06 plr-121201-13 date date legend ty ------- taxpayer --------------------------------------------------------------------------- accounting firm ------------------------------------------- company ------------------------------- shareholder -------------------------- date -------------------- date ---------------------- date ---------------------- date ------------------- state a ---------- dear ------------------- this responds to a letter dated april supplemented by letters dated july and date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by penalty of perjury statements executed by appropriate parties this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer is a domestic_corporation with a calendar taxable_year taxpayer was formed to serve as an interest charge domestic_international_sales_corporation ic-disc and plr-121201-13 has established a commission arrangement with company taxpayer and company both are wholly owned by shareholder on date shareholder and accounting firm met on to discuss the establishment of an ic-disc shortly thereafter on date shareholder decided to proceed with the establishment of an entity to be an ic-disc shareholder incorporated taxpayer on date in state a taxpayer intended to elect to be treated as an ic-disc as of date on date taxpayer and shareholder signed and mailed form 4876-a to the appropriate irs service_center the form 4876-a was not sent by certified mail nor was a return receipt requested after taxpayer filed its initial form 1120-ic-disc interest charge domestic_international_sales_corporation return taxpayer received a notice from an irs service_center indicating that the service_center did not have any record of the form 4876-a having been filed taxpayer is not contesting whether the service_center received the form 4876-a instead taxpayer requests relief under sec_301_9100-3 for an extension of time to file the ic-disc election effective date law and analysis sec_992 provides that an election by a corporation to be treated as a disc1 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temp sec_1_921-1t provides in part that a corporation electing ic- disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i as used in this letter the terms ic-disc and disc have the same meaning plr-121201-13 sec_301_9100-1 provides that a regulatory election is 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 for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 a copy of this letter_ruling should be filed with the form 4876-a 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 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely ____________________________ christopher j bello chief branch office of associate chief_counsel international


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp - plr-114293-00 date date distributing controlled business a business b employee a employee b employee c employee d employee e state r date s u w x trust y state z this letter responds to a letter dated date submitted on your behalf by your authorized representative in which rulings were requested regarding certain federal_income_tax consequences of a proposed transaction the information submitted in that request and in letters dated october november and date and january and date is substantially as set forth below distributing is a state r corporation engaged in business a and business b distributing is the common parent_corporation of an affiliated_group that joins in the filing of a consolidated federal_income_tax return distributing uses an accrual_method of accounting with a tax_year ending december as of date s distributing had outstanding w shares of a single class of voting common_stock held by x shareholders of record while no individual owns a greater-than-five-percent beneficial_interest in the stock of distributing trust holds y percent greater than five percent of distributing’s outstanding_stock plr-114293-00 distributing will form controlled under state z law solely for the purpose of completing the proposed transaction controlled will use an accrual_method of accounting and will have a tax_year ending december financial information has been provided showing that each of business a and business b has receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years distributing has become aware that certain employees who are key to the continued success of business b are considering leaving distributing’s business b due in part to their lack of ownership in the company for which they work employee a employee b employee c and employee d have informed distributing that unless it offers them the opportunity to hold an equity_interest in business b as a separate stand-alone company they will consider terminating their employment with distributing employee e a candidate to fill the cfo position for distributing’s business b also has requested an opportunity to hold an equity_interest in business b as a separate stand- alone company as a condition to accepting the position of cfo the information submitted indicates that the objective of the proposed distribution which is to permit business b to attract retain and motivate key management employees can be achieved only by offering equity interests in business b as a stand-alone company and cannot be achieved through an alternative transaction not involving the distribution of controlled stock accordingly the following transaction has been proposed on the date of the distribution described below distributing will contribute to controlled all of the assets of business b in exchange for percent of the outstanding common_stock of controlled and the assumption by controlled of the liabilities relating to business b distributing will distribute shares of controlled stock to employee a in exchange for employee a’s shares of distributing and distributing will distribute all of the other shares of controlled pro_rata to its shareholders other than employee a the distribution if necessary fractional shares will be issued within one year of the distribution employee a employee b employee c employee d and employee e will purchase from controlled in exchange for three-year recourse notes an aggregate of u percent of the shares of common_stock of controlled which when added to the shares acquired by employee a in step above will total at least percent of the outstanding_stock of controlled the following representations have been made in connection with the proposed transaction plr-114293-00 a b c d e f g h i the fair_market_value of the controlled stock to be received by employee a will be approximately equal to the fair_market_value of the distributing stock surrendered by the shareholder in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing the fair_market_value of the gross assets of distributing’s business a will be immediately after the distribution equal to or greater than five percent of the fair_market_value of all of distributing’s assets the fair_market_value of the gross assets of controlled’s business b will be immediately after the distribution equal to or greater than five percent of the fair_market_value of all of controlled’s assets the five years of financial information submitted on behalf of distributing’s business a and business b is representative of their present operation and with regard to each such business there have been no substantial operational changes since the date of the last financial statements submitted following the proposed transaction distributing and controlled will each continue the active_conduct of its business independently and with their separate employees the distribution will be carried out for the following corporate business_purpose to permit controlled to provide certain key employees with significant equity interests in business b in order to retain and incent these employees and recruit a qualified cfo the distribution is motivated in whole or substantial part by this corporate business_purpose there is no plan or intention by any shareholder who own sec_5 percent or more of the stock of distributing and other than the shareholders’ annual gifting of distributing shares in the ordinary course of their estate_planning the management of distributing to its best knowledge is not aware of any plan or intention on the part of any other particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in or securities of either distributing or controlled after the transaction there is no plan or intention by either distributing or controlled directly or indirectly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 plr-114293-00 j k l m n o p q r there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation subsequent to the transaction except in the ordinary course of business the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing each equals or exceeds the sum of the liabilities assumed by controlled as determined under sec_357 the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of the business and are associated with the assets being transferred the income_tax_liability for the taxable_year in which investment_credit_property including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 to reflect an early disposition of the property no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of controlled's stock immediately prior to the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations furthermore any excess_loss_account of distributing with respect to the controlled stock will be included in income immediately before the distribution and any excess_loss_account of controlled with respect to any consolidated subsidiary will be included in income immediately before the distribution payments made in connection with all continuing transactions if any 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 no two parties to the transaction are investment companies as defined in sec_368 and iv the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or controlled or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled based solely on the information submitted and on the representations set forth above it is held as follows plr-114293-00 the transfer by distributing to controlled of the business b assets described above in exchange for all the stock of controlled and the assumption by controlled of liabilities associated with business b followed by the distribution of controlled stock will qualify as a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing upon the transfer of assets to controlled in exchange for controlled stock and the assumption_of_liabilities sec_361 and sec_357 no gain_or_loss will be recognized by controlled on the receipt of the business b assets in exchange for all the shares of controlled stock sec_1032 the basis of the assets received by controlled will be the same as the basis of such assets in the hands of distributing immediately prior to the transaction sec_362 the holding_period of the assets received by controlled will include the period during which distributing held such assets sec_1223 no gain_or_loss will be recognized by distributing upon the distribution sec_361 no gain_or_loss will be recognized by and no amount will be included in the income of distributing’s shareholders upon receipt of the controlled stock sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of employee a upon his receipt of the controlled stock in exchange for all of his distributing stock sec_355 the basis of the stock of distributing and controlled in the hands of the distributing shareholders other than employee a after the distribution will in each instance be the same as the aggregate basis of the distributing stock held immediately before the distribution allocated in proportion to the fair_market_value of each in accordance with sec_1 a sec_358 the basis of the controlled stock received by employee a will equal employee a’s aggregate basis in the distributing stock surrendered in the exchange sec_358 the holding_period of the controlled stock in the hands of the distributing shareholders other than employee a will include the holding_period of plr-114293-00 the distributing stock with respect to which the distribution is made provided that such stock was held as a capital_asset by such shareholder on the date of the distribution sec_1223 the holding_period of the controlled stock received by employee a will include the holding_period of the distributing stock surrendered in the exchange provided that such stock is held as a capital_asset on the date of the exchange sec_1223 as provided in sec_312 of the code proper allocation of earnings_and_profits between distributing and controlled will be made under sec_1_312-10 and sec_1_1502-33 no opinion is expressed about the tax treatment of the transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated sincerely yours associate chief_counsel corporate by senior technician reviewer branch


department of the treasury washington dc contact person telephone number in reference to op e ep t4 date sep - ices internal_revenue_service uniform issue list number legend individual a individual b individual c individual d individual e individual f ira ira ira ira ira ira this is in response to your date as supplemented by letters dated date and date request for a private_letter_ruling concerning the tax treatment of certain transactions relating to individual a and individual b’s individual_retirement_arrangements iras the following facts and representations have been submitted in support of your ruling_request individual a established an ira ira pursuant to a beneficiary designation timely signed individual b the lawful spouse of individual a was the sole beneficiary of ira to individual a’s death individual b established ira established by individual a and individual b were at all times in compliance with seétion a of the internal_revenue_code itis represented that the iras prior individual a reached age in and began receiving distributions from ira compliance with the minimum_required_distribution provisions of code sec_408 and sec_401 a in as the owner of ira and also being over the age of individual b began receiving the required minimum distributions with respect to ira in in individual a died in as sole beneficiary individual b received the required_minimum_distribution from ira for subsequently individual b by means of a trustee- to-trustee transfer transferred the assets of ra to her own ira ira your authorized representative has represented on your behalf that the assets transferred from ira to ira were not commingled with the assets already in ira and were subject_to separate_accounting subsequently individual b transferred by means of trustee-to-trustee transfers the assets transferred from ira to ira which were segregated from the assets in ira prior to the transfer into four new iras ira sec_3 through individuals c d e and f were named the beneficiaries of ira sec_3 through the assets transferred from ira to ira sec_3 through did not include any assets that were in ira prior to the transfer of ira into ira individual b will begin to receive required minimum distributions from ira sec_3 through no later than date based on the foregoing you request the following rulings that individual b may elect to treat ira as her own notwithstanding the fact that at the death of her husband both individual a and individual b had passed the required_beginning_date for determining the required_minimum_distribution rmd under code sec_408 of the internal_revenue_code_of_1986 as amended the code and that individual b’s transfer of the funds from individual a’s ira to her own ira constitutes a sufficient election to treat individual a’s ira as her own that the transactions referenced above whereby individual b transferred by means of trustee-to-trustee transfers the portion of ira which consisted of the amounts transferred from ira into ira sec_3 through do not constitute rollovers subject_to the one rollover per year limitation found in code sec_408 that for purposes of code sec_408 and the income_tax regulations promulgated thereunder individual b’s required_beginning_date for ira sec_3 through will be date and that individuals c d e and f will be treated as designated beneficiaries pursuant to sec_408 of the code for computation of the rmd to individual b if they are properly so designated on or before december that with respect to ra sec_3 through individual b may elect whether or not to recalculate her life expectancy under sec_401 of the code and sec_1 a -1 q a e-7 a and c of the regulations before her required_beginning_date of date that no excise_tax under sec_4974 of the code will be imposed for calendar years after so long as amounts actually distributed from individual b’s four iras ira sec_3 through are greater than or equal to the minimum amounts required to be distributed to individual b under sec_408 of the code that no excise_tax under sec_4974 of the code will be imposed for a failure to make distributions from individual b’s four iras ira sec_3 through for any calendar_year prior to with respect to your ruling_request sec_408 of the code defines an individual_retirement_account as a_trust which meets the requirements of sec_408 through a sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained sec_408 of the code sets forth the requirements for a tax-free_rollover of amounts distributed from an ira sec_408 limits such rollovers for an individual to no more than once a year sec_401 and ii and a c of the code provide that the entire_interest of each employee under a plan to which the required_minimum_distribution rules apply must be distributed no later than april of the calendar_year following the calendar_year in which the individual attains age the required_beginning_date or in general must be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of the employee or over the lives of the employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary sec_401 of the code provides in part that if distributions have begun and the employee dies before the entire_interest has been distributed to him then the remaining portion of such interest shall be distributed at feast as rapidly as under the method of distribution being used as of the date of his death sec_1_408-8 q a a-4 b of the proposed income_tax regulations states in relevant part that in the case of an individual dying after date the individual’s surviving_spouse may elect to treat the spouse's entire_interest in the trust as the spouse’s own account the result of such an election is that the surviving_spouse shail then be considered the individual for whose benefit the trust is maintained if the surviving_spouse makes such an election the surviving spouse's interest in the account would then be subject_to the distribution_requirements of sec_401 of the code rather than those of sec_401 an election to claim the ira as the surviving spouse’s own will be considered to have been made by the surviving_spouse if any required amounts in the account including any amounts that have been transferred into an ira for the benefit of such surviving_spouse have not been distributed within the appropriate time period applicable to the decedent under sec_401 q a a-4 lists actions by which a surviving_spouse can make said election however q a a-4 does not provide the exclusive methods by which a surviving_spouse may so elect there is no requirement that the surviving_spouse not have reached the required_beginning_date in order for such individual to claim an ira as his or her own accordingly with respect to ruling_request number one we conclude that for purposes of code sec_408 individual b may lawfully claim ira as her own notwithstanding the fact that at the death of individual a both individual a and individual b had passed the required_beginning_date furthermore we conciude that the transfer of individual a’s ira to individual b’s ira constitutes a sufficient election to treat individual a’s ira as individual b’s with respect to ruling_request number two we rule that the trustee-to-trustee transfer of individual a’s ra to individual b’s ira at the direction of individual b constitutes an election to treat such transferred portion as taxpayer’s own and therefore qualifies as a tax-free transfer pursuant to sec_408 and is not subject_to the limitation found in code sec_408 with respect to ruling_request three sec_1_401_a_9_-1 q a d-3 a of the proposed_regulations states in part that generally for purposes of calculating the distribution period described in sec_401 of the code for distributions before death the designated_beneficiary will be determined as of the employee’s required_beginning_date sec_1_401_a_9_-1 q as f-1 b and c of the proposed_regulations state in part that the distribution required to be made on or before the employee's required_beginning_date shail be treated as the distribution required for the employee's first distribution calendar_year a calendar_year for which a minimum distribution is required is a distribution calendar_year the first calendar_year for which a distribution is required is an employee’s first distribution calendar_year the distribution required for distribution calendar years other than a distribution required to be made on or before the employee's required_beginning_date must be made on or before december of that distribution calendar_year sec_1_408-8 q a a-7 of the proposed_regulations provides in part that in the case of a transfer from one ira to another ira the rules of sec_1_401_a_9_-1 q a g-4 of the proposed_regulations apply for purposes of determining the account balance of and the minimum distribution from the iras involved sec_1_401_a_9_-1 q a g-4 provides in part that in the case of a transfer of an amount of an employee's benefit from one plan to another the general_rule is that the benefit of the employee under the transferee_plan is increased by the amount transferred the transfer has no impact on the minimum distribution required to be made by the transferee_plan in the calendar_year in which the transfer is received however if a minimum distribution is required from the transferee_plan for the following calendar_year the transferred amount must be considered to be part of the employee's benefit under the transferee_plan with respect to your third ruling_request in general a surviving_spouse who rolls over or transfers a distribution received from the ira of her deceased husband into her own ira is treated as having an account balance for purposes of code sec_401 a and the required_distribution rules as of the last date of the calendar_year during which the rollover or transfer is accomplished thus required distributions from said rollover ira must commence no later than the end of the calendar_year immediately following the calendar_year of rollover or transfer in this case individual b accomplished her transfers during the calendar_year thus she will have an account balance for purposes of the required_distribution rules as of date in accordance with the rule given above individual must begin to receive required distributions from her rollover ira no later than date furthermore if individual b intends to receive required distributions over the joint life expectancy of a designated_beneficiary and herself she must designate her beneficiary no later than date the entire balance credited to individual a’s ira ira was transferred in to individual b’s ira ira and subsequently to ra sec_3 through in late at the same time an election was made by individual b to treat ira as her own account accordingly for purposes of sec_408 of the code and the income_tax regulations thereunder individual b’s required_beginning_date for ira sec_3 through will be date while the proposed_regulations do not specifically answer the second part of ruling_request three in the absence of final regulations issues may be resalved by a reasonable interpretation of the proposed_regulations and statutory provisions accordingly itis a reasonable interpretation of the minimum distribution_requirements with respect to ruling requests three that individuals c d e and f may be treated as designated beneficiaries of ira sec_3 through respectively for purposes of sec_408 of the code since individual b will have designated the beneficiaries before her first required_distribution date of date with respect to ruling_request four sec_401 of the code states that for purposes of sec_401 the life expectancy of an employee and the employee’s spouse other than in the case of a life_annuity may be redetermined but not more frequently than annually sec_1_401_a_9_-1 q a e-7 a of the proposed_regulations states in part that if the plan does not adopt an optional provision specifying whether life expectancies will be determined with or without regard to the permissive recalculation rule_of sec_401 of the code and the employee or spouse has not made an election pursuant to q a e-7 c the life expectancy of the employee or spouse or the joint life and last survivor expectancy of the employee and spouse must be recalculated annually as provided in sec_401 a d for purposes of determining all distributions required under sec_401 sec_1_401_a_9_-1 q a e-7 of the proposed_regulations states that the plan may adopt a provision that permits the employee or spouse in the case of distributions described in sec_401 and iv of the code to elect the applicability or inapplicability of sec_401 if such election is permitted the employee or spouse must elect whether or not life expectancy will be recalculated no later than the time of the first required_distribution under sec_401 accordingly with respect to ruling_request four you may elect whether or not to recalculate your life expectancy under sec_401 a d of the code and sec_1 a - q a e-7 a and c of the proposed_regulations before your required_beginning_date of date as long as said election s are permitted under ira sec_3 and with respect to ruling_request five sec_4974 states in part that if the amount distributed during the taxable_year of the payee under any qualified_retirement_plan including an ira as defined in code sec_408 is less than the minimum_required_distribution for such taxable_year there is hereby imposed a tax equal to percent of the amount by which such minimum distribution exceeds the actual amount distributed during the taxable_year therefore regarding ruling_request five because invididual b has assumed individual a's iras as her own and individual b is considered the individual for whose benefit the iras are maintained individual b’s required_minimum_distribution will be determined by the distribution provisions of sec_401 of the code over individual b’s life or over the lives of individual b and a designated_beneficiary or over a period not extending beyond the life expectancy of individual b or the life expectancy of individual b anda designated_beneficiary we therefore conclude with respect to ruling_request five that no excise_tax under sec_4974 will be imposed for calendar years after so long as amounts actually distributed from ira’ sec_3 through are greater than or equal to the minimum amounts required to be distributed to individual b under sec_408 we further conciude with respect to ruling_request six that no excise_tax under sec_4974 will be imposed for failure to make distributions from ira sec_3 through for any calendar_year prior to this ruling is based on the assumption that ail iras meet the requirements of sec_408 of the code at all times the original letter and a copy of this letter have been sent to your authorized representative in accordance with a power_of_attorney on file in this office this ruling is directed only to the taxpayer who requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent sincerely yours john g riddle jr chief employee_plans technical branch nr ecterde a


internal_revenue_service number release date uil index no date cc ita br05 plr-127885-01 legend m taxpayer n x y y a state dear taxpayer this is in response to your authorized representative’s letter of date and other correspondence and submissions in which she requested on your behalf rulings regarding the application of sec_1033 of the internal_revenue_code_of_1986 to a certain property transaction as further described below we are pleased to address your concerns the information submitted indicates that you taxpayer hereinafter m possessed a certain property interest in y a y facility which was acquired in a joint_venture with n other similarly situated individuals and with x in title to y was held by a subsidiary of x which operated the facility m’s interest in y consisted of a right to the non-exclusive use and enjoyment of the y facility by m for her lifetime in x sold y to an unrelated party and relocated m and similarly situated resident individuals in disregard of their interests in y m and similarly situated owners of interests in y brought suit against x in a court of general jurisdiction of state a for compensable damages for the fraudulent conveyance a jury verdict was returned in favor of m et al x’s liability was upheld upon appeal to the court_of_appeals of state a in m and similarly situated displaced residents entered into a court-approved settlement with x and in that same year x paid the compensable damage amount to m’s attorneys sec_1033 of the code provides in part that if property as a result of its destruction in whole or in part theft seizure or requisition or condemnation or threat or imminence thereof is compulsorily or involuntarily converted into money and during the period specified in sec_1033 the taxpayer purchases property similar_or_related_in_service_or_use to the converted property at the election of the taxpayer gain will be recognized only to the extent that the amount_realized upon the conversion exceeds the cost of the replacement_property sec_1033 provides that the replacement_period referred to in subparagraph a is the period beginning with the date of the disposition_of_the_converted_property and ending two years after the close of the first taxable_year in which any part of the gain upon the conversion is realized or such later date as the secretary may designate upon application of the taxpayer the term property is to be construed broadly for purposes of sec_1033 and includes a variety of property rights and interests recognized under state law for example life estates remainders leaseholds partial_interests and interests where title is not held directly by the taxpayer may constitute property for purposes of sec_1033 see eg revrul_71_567 1971_2_cb_309 and revrul_83_70 1983_1_cb_189 an applicable definition of a theft for federal income taxes is found in edwards v bromberg fed 2d 5th cir here the court defined theft as a word of broad and general connotation intended to cover any criminal appropriation of another’s property to the use of the taker particularly including theft by swindling false pretenses and any other form of guile see also 55_tc_1020 aff’d 471_f2d_738 and revrul_66_355 1966_2_cb_302 the jury and appellate court in the taxpayer-specific litigation referred to above specifically determined that m and similarly situated owners of interests in y were possessed of valuable property rights in y under the laws of state a that they were deprived of these rights by fraud and fraudulent concealment and that they were entitled to compensation or proceeds measured by what they should have received were their interests observed we concur with the finding of the court that m’s interest in y constituted a valuable property right of m under state law and we agree with the taxpayer that such interest represents property for purposes of sec_1033 that would otherwise be subject_to recognition of gain upon a sale disposition or conversion into money additionally we agree that the fraudulent conveyance of m’s interest by x under the circumstances described represented an involuntary_conversion by theft under the laws of state a and within the intendment of sec_1033 and the regulations thereunder accordingly based on the information and representations provided we conclude that the taxpayer m is entitled to the nonrecognition treatment provided in sec_1033 for the involuntary_conversion of her property interest in y if she properly elects such treatment under sec_1_1033_a_-2 of the regulations and acquires property similar_or_related_in_service_or_use by the date referred to in sec_1033 including any extended period as may be granted pursuant to approval of an application filed under sec_1 c of the regulations we are advised that the taxpayer will make such election and that an extension of the replacement_period will be requested from the taxpayer’s irs director m’s interest in the subject property is that of an owner-user rather than an owner- investor in determining whether replacement_property is similar_or_related_in_service_or_use we note that the replacement_property need not be identical to that involuntarily converted the law requires only that the replacement_property have a close functional similarity to the converted property see eg revrul_64_237 1964_2_cb_319 generally property is not considered similar_or_related_in_service_or_use to the converted property unless physical characteristics and end-uses of the converted and replacement properties are closely similar for example acquisition by m of a right to the non-exclusive use and enjoyment of a y facility by m for her lifetime would satisfy this requirement additionally we note that in measuring the amount of conversion proceeds that must be reinvested in replacement_property pursuant to an election under sec_1033 reduction may be made for certain legal and other expenses_incurred in obtaining award of the proceeds see revrul_71_476 1971_1_cb_308 this letter_ruling is based on the facts and representations provided by m and n and is limited to the matters specifically addressed no opinion is expressed as to the tax treatment of the transactions considered herein under the provisions of any other sections of the code or regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from such transactions which are not specifically addressed herein because it could help resolve possible federal tax issues a copy of this letter_ruling should be maintained with m’s permanent records pursuant to a power_of_attorney currently on file with this office a copy of this letter is being sent to m’s designated authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent associate chief_counsel s william a jackson by_________________________ william a jackson income_tax accounting sincerely yours chief branch enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number --------------------------------- ------------------------------------------- --------------------------------------------------------------- ----- ----------------------------------------------- -------------------- ----------------------------------- ---------------------- 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 b02 plr-140692-09 date date legend x country d1 dear --------------- ------------------------------------------- ----------------------- ---------------------- --------------------------- this responds to your letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity the information submitted states that x was formed under the laws of country x represents that as a foreign eligible_entity x intended to elect to be treated as a disregarded_entity effective d1 however x inadvertently failed to timely file a form_8832 entity classification election sec_301_7701-3 of the income_tax regulations provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner plr-140692-09 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than 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 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_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief 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 granting relief will not prejudice the interests of the government based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of sixty days from the date of this letter to elect to be treated as a disregarded_entity for federal tax purposes effective d1 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-140692-09 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 s requesting it sec_6110 of the internal_revenue_code 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 will be sent to your authorized representatives sincerely curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes