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 plr-124640-12 date date legend fparent fsub1 fsub2 distributing1 distributing2 distributing3 --------------------------------------------- ------------------------------- ----------------------- --------------------------- ------------------------------- ----------------------- ------------------------------------ ----------------------------------- ------------ ---------------------------------- ------------------------------- ----------------------- -------------------------------- ------------------------------- ----------------------- --------------------- ------------------------------- ----------------------- plr-124640-12 controlled1 controlled2 controlled3 sub1 sub2 sub3 sub4 sub5 sub6 sub7 ------------------------------------------ ------------------------------- ----------------------- ------------------------------------- ------------------------------- ----------------------- ---------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- ------------ ------------------------ ------------------------------- ----------------------- ----------------------------------------- ------------------------------- ----------------------- ------------------------- ------------------------------- ----------------------- ---------------------------------- ------------------------------- ----------------------- --------------------------------------------------- ------------------------------- ----------------------- ------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------------------- ----------------------- --------------------------------------------------- ------------------------------- ----------------------- plr-124640-12 sub8 sub9 sub10 sub11 foreign sale agreement foreign agreement business a -------------------------------------- ------------------------------- ----------------------- --------------------------------------------- ---------------------------- ----------------------- ------------------------------------ ----------------------------------------------- ----------------------- ----------------------------------------------- ------------------------------- ----------------------- ---------------------------------------------------------------------------------------- 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---------------------------------------------------------------------------------------- ------------------------------------------------------------------- plr-124640-12 business a1 business a2 business a3 business a4 business purposes a b c d e f g h i ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ------------------ ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------- 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---------------- ------------ plr-124640-12 j k l m n o p q r s t u v w x y z aa bb cc dd ee ---- ------ ------- ------- ------ ------- ------- ------ ------ ------- ----------- --------- ----------- --------------- ----------------- ------------- ------------- --------------- ----------- ------------- ------------- --------------- plr-124640-12 ff gg hh ii jj kk ll mm nn oo pp qq rr ss tt uu vv country a country b country c state a date ------------- --------------- ----- ----- --------------- ------------- ----- -------------- -------------- ----- ------------- ------------- ---------------- ---------------- -------------- -------------- --------- ---------- ----------------- --------------- ------------- --------------------- plr-124640-12 date date date date date date date date date date date date date date date date date ---------------------- ---------------------- --------------------- --------------------- -------------------------- ------- ----------------------- ----------------------- --------------------- ------- --------------------- ----------------------------------------------------- ---------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------ ------------------ ----------------------- ------------------ dear ----------------- this letter responds to your authorized representative’s letter dated date requesting rulings regarding certain federal_income_tax consequences of a proposed transaction the information submitted in that request and in later correspondence is summarized below collectively the plr submission plr-124640-12 the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether distribution distribution and distribution collectively the distributions described below i satisfy the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii are being used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or controlled_corporation or both see sec_355 and sec_1_355-2 or iii are parts 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 organizational structure summary of facts fparent a publicly traded country a corporation owns all of the stock of fsub1 a country a corporation which in turn owns all of the stock of fsub2 a country b corporation and all of the stock of distributing3 the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return the distributing3 consolidated_group fparent and all of its subsidiaries are referred to as the fparent group distributing3 owns all of the stock of sub1 and sub2 sub2 owns all of the stock of sub5 sub1 owns all of the common_stock of distributing1 distributing1 owns all of the stock of controlled1 and distributing2 distributing3 and distributing2 own j and n percent of the only class of stock of sub3 respectively distributing1 owns k percent of the only class of common_stock of sub4 the remaining common_stock of sub4 is owned by other members of the distributing3 consolidated_group sub4 sec_1504 preferred_stock is owned l percent by members of the distributing3 consolidated_group and m percent by unrelated parties distributing1’s remaining stock sec_1504 preferred_stock is owned by sub4 and sub9 sub9 is an indirect wholly owned subsidiary of distributing3 controlled2 has one class of common_stock and two classes of sec_1504 preferred_stock distributing3 distributing1 distributing2 sub5 and sub3 own o p q r and s percent respectively totalling percent of the common_stock of controlled2 the plr-124640-12 controlled2 common_stock additionally sub5 owns t shares percent of controlled2 series a preferred_stock and u shares of controlled2 series b preferred_stock controlled2 owns all of the stock of sub6 which in turn owns all of the only class of common_stock of sub7 and sub8 controlled1 owns all of the issued and outstanding sec_1504 preferred_stock of sub7 and sub8 sub6 owns v shares of controlled2 series b preferred_stock distributing1 distributing2 distributing3 controlled1 controlled2 sub1 sub2 sub3 sub4 sub5 sub6 sub7 sub8 sub9 and sub10 are each members of the distributing3 consolidated_group fparent conducts business a in four segments businesses a1 a2 a3 and a4 through its subsidiaries sub5 is directly engaged in business a1 sub6 is directly engaged in business a2 controlled1 is directly engaged in business a3 and distributing2 is directly engaged in business a4 controlled1 does not have any employees of its own sub10 has ultimate managerial and supervisory responsibility for the performance of controlled1’s business a3 and performs such management services with its own employees distributing3 owes approximately dollar_figurea to fsub2 and dollar_figureb to fparent the latter the fparent note fparent note was issued in date by distributing3 to fparent as a revolving demand instrument accruing interest at an annual rate of f percent the current stated principal_amount is approximately dollar_figureb fparent note is debt for u s federal_income_tax purposes in connection with the proposed transactions defined below fparent note may be bifurcated into new fparent note and note if so note will be reissued for a stated principal_amount of dollar_figurei with the remaining amount reissued as new fparent note the terms of new fparent note and note subsequent to any bifurcation will be otherwise identical to fparent note prior to such bifurcation any accrued and unpaid interest with respect to fparent note will be paid in cash prior to any bifurcation or reissuance and any accrued and unpaid interest with respect to fparent note and or note will be paid in cash prior to any actual or deemed transfer or assumption of such notes in connection with the proposed transactions such new fparent note and note will be debt for u s federal_income_tax purposes fsub2 holds two notes receivable from distributing3 the first original note is a year note due on date issued on date with a stated principal_amount of approximately dollar_figurec accruing interest at an annual rate of d percent and the second original note is a 10-year note due on date issued on date with a stated principal_amount of approximately dollar_figuree also accruing interest at an annual rate of d percent in connection with the proposed transactions original note will be bifurcated into note having a stated principal_amount of approximately dollar_figurett and note having a stated principal_amount of approximately dollar_figureuu each due on date the exact principal_amount of note will be equal to the fair_market_value of the controlled2 plr-124640-12 stock redeemed in the distributing3 redemption defined below the terms of note and note are otherwise identical to those of original note also in connection with the proposed transactions original note will be bifurcated into note having a stated principal_amount of dollar_figureg and note having a stated principal_amount of approximately dollar_figureh each accruing interest at prevailing rates and due on date the terms of note and note are otherwise identical to those of original note any accrued and unpaid interest with respect to original note and original note will be paid in cash prior to their respective bifurcations and any accrued and unpaid interest with respect to note and or note and note and or note will be paid in cash prior to any actual or deemed transfer or assumption of such notes in connection with the proposed transactions original note and original note are and note note note and note will be debt for u s federal_income_tax purposes prior transactions involving controlled2 stock before the proposed transactions members of the distributing3 consolidated_group sold or distributed shares of controlled2 common_stock in transactions involving other members of the distributing3 consolidated_group fparent and third parties controlled2 also redeemed shares of controlled2 common_stock and controlled2 series a and controlled2 series b preferred_stock held by third parties as a result of the intercompany_transactions gains were recognized by distributing3 consolidated_group members that were deferred pursuant to sec_1_1502-13 digs on date distributing2 distributed w shares of controlled2 common_stock the dig stock to its immediate parent distributing1 the first dig transaction the first dig transaction was treated as a taxable_distribution of stock in which distributing2 recognized a dollar_figurex gain under sec_311 dig that was deferred under sec_1_1502-13 on date distributing1 contributed y shares of the dig stock to distributing2 in a transaction treated as a tax-free contribution distributing1’s contribution of those shares of dig stock to distributing2 resulted in a portion of distributing1’s distributing2 stock being treated as a successor asset successor asset a to the dig stock under sec_1_1502-13 on date distributing2 sold z shares of controlled2 common_stock the dig stock to distributing1 the third dig transaction distributing2 recognized gain under sec_1001 in the amount of dollar_figureaa dig that was deferred under sec_1_1502-13 on date distributing2 sold bb shares of controlled2 common_stock the dig stock to distributing3 the fourth dig transaction distributing2 recognized gain under sec_1001 in the amount of dollar_figurecc dig that was deferred under sec_1_1502-13 plr-124640-12 on date sub3 purchased dd shares of controlled2 common_stock the dig stock from distributing1 the fifth dig transaction distributing1 recognized gain under sec_1001 in the amount of dollar_figureee dig that was deferred under sec_1_1502-13 on date distributing1 sold ff shares of controlled2 common_stock the dig stock to sub5 the seventh dig transaction distributing1 recognized gain under sec_1001 in the amount of dollar_figuregg dig that was deferred under sec_1_1502-13 during date distributing3 purchased the outstanding shares of controlled2 common_stock held by unrelated shareholders as a result controlled2 joined the distributing3 consolidated_group on date on date controlled2 redeemed all of its preferred shares outstanding other than the shares of controlled2 preferred_stock held by sub5 and sub6 the controlled2 preferred_stock redemption on date sub6 distributed all the stock of controlled1 to controlled2 controlled2 then transferred the stock of controlled1 to distributing1 in exchange for shares of controlled2 common_stock held by distributing1 the controlled1 split prior to sub6’s distribution of controlled1 to controlled2 controlled1 distributed to sub6 its sub7 and sub8 common_stock in a taxable_distribution subject_to sec_301 and sec_311 controlled1 realized a gain on the sub7 stock and realized a loss on the sub8 stock each of which was deferred under sec_1_1502-13 the controlled1 split was a tax-free transaction under sec_355 the controlled1 split resulted in distributing1’s controlled1 stock being treated as a successor asset successor asset b to a portion of the dig stock under sec_1_1502-13 during date controlled2 executed a reverse_stock_split of controlled2 common_stock a transaction that qualified as a recapitalization under sec_368 on date and date controlled2 issued hh and ii shares of controlled2 common_stock to distributing3 for cash capital contributions of dollar_figurejj and dollar_figurekk respectively relating to an employee compensation arrangement fparent and or its affiliates may engage in similar contributions in the future which would result in the issuance of additional controlled2 common_stock on date controlled2 redeemed ll of its common shares outstanding held by sub5 for cash and or marketable_securities proposed transactions the following steps are proposed collectively the proposed transactions plr-124640-12 i ii iii iv v vi sub1 will adopt a plan_of_liquidation and either i distribute all of its assets subject_to its liabilities to distributing3 in a complete_liquidation and dissolve under applicable state law or ii merge with and into distributing3 under applicable state law the sub1 liquidation following the sub1 liquidation distributing3 will directly own percent of the distributing1 stock controlled2 will redeem all outstanding controlled2 series a and controlled2 series b preferred_stock held by sub5 and approximately dollar_figuremm of the dollar_figurenn worth of controlled2 common_stock held by sub5 in exchange for cash and or marketable_securities the sub5 redemption distributing1 will distribute all of its outstanding_stock of controlled1 to distributing3 in exchange for a portion of distributing3’s distributing1 common_stock distribution distributing1 will merge with and into distributing2 with distributing2 surviving in a transaction in which distributing2 will issue common and preferred distributing2 stock such that each distributing1 shareholder holding common and or preferred distributing1 stock receives distributing2 stock of a like_class the downstream_merger controlled2 will redeem oo shares of sub3’s controlled2 common_stock in exchange solely for approximately dollar_figurepp in cash the sub3 redemption sub3 will adopt a plan_of_liquidation and will then redeem distributing3’s sub3 stock in exchange for approximately dollar_figureqq in cash subsequently sub3 will either i distribute all of its remaining assets subject_to its liabilities to distributing2 in a complete_liquidation and dissolve under applicable state law ii convert to a limited_liability_company llc treated as a disregarded_entity for u s federal tax purposes conversion or iii merge with and into distributing2 under applicable state law any of these together with the redemption of distributing3’s sub3 stock the sub3 liquidation vii sub5 will contribute its remaining shares of controlled2 common_stock to distributing2 in exchange for a new class of voting distributing2 preferred_stock the distributing2 voting preferred_stock the sub5 contribution viii controlled2 will redeem a portion of the shares of controlled2 common_stock held by distributing2 in exchange for cash and or marketable_securities equal to the fair_market_value of the redeemed shares the distributing2 redemption distributing2 will retain and use the redemption proceeds in its business plr-124640-12 ix x xi xii controlled2 will recapitalize by acquiring the controlled2 series b preferred_stock held by sub6 in exchange for a new class of voting controlled2 preferred shares new controlled2 voting preferred_stock controlled2 recap aside from the difference in voting rights there will be no differences between the controlled2 series b preferred_stock and the new controlled2 voting preferred_stock with regard to dividends liquidation or any other rights preferences or limitations controlled2 will redeem approximately vv shares of its controlled2 common_stock held by distributing3 in exchange for controlled2’s assumption of note the distributing3 redemption distributing2 will distribute all of its remaining shares of controlled2 common_stock to distributing3 pro_rata solely with respect to the distributing2 common_stock distribution in a series of transfers occurring outside the u s among non-u s entities fsub1 will organize a foreign holding_company structure primarily to operate business a2 it is anticipated that fsub1 will form a holding_company organized under the laws of country a country a holdco which will subsequently form another new company organized under the laws of country b country b holdco to operate as the holding_company for business a2 thereafter country b holdco will form a new company organized under the laws of country c as part of the proposed transactions country c newco country c newco will form another new company organized under the laws of country b country b holdco to achieve various business objectives fsub1 will form these entities and contribute capital and or certain entities to country c newco the organization of new entities and related transfers collectively foreign transaction xiii sub6 will sell its non-u s operations to country c newco or a wholly owned subsidiary of country c newco pursuant to the foreign sale agreement the foreign sale in addition sub6 will enter into various arm’s-length business transactions with country c newco or an affiliate of country c newco including the foreign agreement xiv distributing3 will form a new holding_company controlled3 organized under the laws of state a the controlled3 formation distributing3 will contribute all of its controlled2 common_stock in exchange for controlled3 common_stock approximately dollar_figurerr of controlled3 debt securities the controlled3 securities and controlled3’s assumption of obligations under note and note collectively with the controlled3 formation the controlled3 transfer thereafter distributing3 will repay approximately dollar_figuress of the fparent note in exchange for the controlled3 securities the plr-124640-12 xv distributing3 debt exchange and distributing3 will distribute all of the issued and outstanding_stock of controlled3 to fsub1 collectively with the controlled3 transfer and the distributing3 debt exchange distribution distributing3 expects to consummate the distributing3 debt exchange in accordance with an exchange_agreement entered into by it and fparent no sooner than days after the latter of the date fparent acquired fparent note or new fparent note pursuant to which the parties will agree to exchange the controlled3 securities received by distributing3 for an amount of either fparent note or new fparent note as applicable to be determined by the parties bargaining at arm’s-length with the exchange occurring no sooner than days after the latter of the date fparent acquired the fparent note or new fparent note fparent will contribute the controlled3 securities to fsub1 in exchange for shares of fsub1 common_stock fsub1 will form a new company organized under the laws of country b country b newco fsub1 will contribute a portion of its shares of fsub2 stock to country b newco in exchange for shares of country b newco stock thereafter fsub2 will distribute note to country b newco in redemption of the shares of fsub2 stock held by country b newco fsub1 will contribute the controlled3 securities and all of the stock of fsub2 to country a holdco in exchange for shares of country a holdco common_stock country a holdco will contribute the controlled3 securities and all of the stock of fsub2 to country b holdco in exchange for shares of country b holdco common_stock thereafter fsub2 will redeem a portion of its stock held by country b holdco in exchange for note and note subsequently country b holdco will contribute in a series of separate transfers the controlled3 securities note note and all of the stock of fsub2 to country c newco in exchange for shares of country c newco common_stock finally country c newco will contribute all of the stock of fsub2 to country b holdco in exchange for shares of country b holdco common_stock in connection with the transfer of fsub2 to country b holdco fparent will secure licenses and tax rulings to convert fsub2 to a business a2 company collectively foreign transaction xvi fsub1 will contribute all the issued and outstanding_stock of controlled3 to country a holdco in exchange for shares of country a holdco common_stock country a holdco will contribute all the issued and outstanding_stock of controlled3 to country b holdco in exchange for shares of country b holdco common_stock country b holdco will contribute all the issued and outstanding_stock of controlled3 to country c newco in exchange for shares of country c newco common_stock collectively foreign transaction representations plr-124640-12 a a1 a2 a3 a4 a5 a6 a7 a8 a9 the sub1 liquidation distributing3 on the date of adoption of the sub1 plan_of_liquidation and at all times until the final liquidating_distribution is completed will be the owner of percent of the sub1 stock no shares of sub1 stock will have been redeemed during the three years preceding the adoption of the sub1 plan of complete_liquidation for the sub1 liquidation and no sub1 stock has been the subject of a prior intercompany recognition transaction under sec_1_1502-13 all distributions from sub1 to distributing3 pursuant to the sub1 plan of complete_liquidation will be made within a single taxable_year of sub1 sub1 will adopt a plan_of_liquidation specifying that the final liquidating_distribution is to be completed within three years from the close of the taxable_year of sub1 in which the first liquidating_distribution is made as soon as the first liquidating_distribution has been made sub1 will cease to be a going concern and its activities will be limited to winding up its affairs paying its debts and distributing its remaining assets to its shareholder sub1 will retain no assets following the final liquidating_distribution or its merger sub1 will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the date of adoption of the sub1 plan_of_liquidation no assets of sub1 have been or will be disposed of by either sub1 or distributing3 except for dispositions in the ordinary course of business or dispositions occurring more than three years prior to adoption of the sub1 plan_of_liquidation except as described in the proposed transactions the liquidation of sub1 will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of sub1 if persons holding directly or indirectly more than percent in value of the sub1 stock also hold directly or indirectly more than percent in value of the stock in recipient for purposes of this representation ownership will be determined by application of the constructive_ownership rule_of sec_318 as modified by sec_304 plr-124640-12 a10 a11 a12 a13 a14 a15 a16 b b1 b2 b3 b4 prior to adoption of the liquidation plan no assets of sub1 will have been distributed in_kind transferred or sold to distributing3 except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to adoption of the sub1 liquidation plan sub1 will report all earned_income represented by assets that will be distributed to its shareholder such as receivables being reported on a cash_basis unfinished construction contracts commissions due dividends etc the fair_market_value of the assets of sub1 will exceed its liabilities both at the date of the adoption of its plan of complete_liquidation and immediately prior to the time the first liquidating_distribution is made there is no intercorporate debt existing between distributing3 and sub1 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 sub1 plan of complete_liquidation any indebtedness between sub1 and any other member of the fparent group is properly characterized as indebtedness for federal_income_tax purposes all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the sub1 liquidation have been fully disclosed distributing3 is not and will not be an organization exempt from u s federal_income_tax under sec_501 or any other provision of the code the sub5 redemption there are no outstanding options or warrants to purchase controlled2 stock nor are there any outstanding debentures or other obligations that are convertible into controlled2 stock or would be considered controlled2 stock no notes or other obligations of controlled2 will be distributed to sub5 in connection with the sub5 redemption no shareholder of controlled2 has been or will be obligated to purchase any of the stock to be redeemed in the sub5 redemption except as described in the proposed transactions the sub5 redemption will be an isolated transaction and will not be related to any past or future transaction plr-124640-12 b5 b6 b7 b8 b9 except as described in the proposed transactions or the summary of facts controlled2 has no plan or intention to issue redeem or exchange additional shares of its stock none of the stock to be redeemed in the sub5 redemption is sec_306 stock within the meaning of sec_306 there are no declared but unpaid dividends or funds set apart for dividends on any of the stock to be redeemed in the sub5 redemption the accrued dividends will be paid according to the terms of the controlled2 series a and controlled2 series b preferred_stock before the sub5 redemption there is no plan or intention to completely liquidate controlled2 or to change its classification to anything other than a corporation for u s federal tax purposes at the time of the sub5 redemption the fair_market_value of the consideration to be received by sub5 will be approximately equal to the fair_market_value of the controlled2 stock to be exchanged therefor b10 no part of the proceeds of the sub5 redemption from controlled2 will be received directly or indirectly by sub5 as a creditor employee or in any capacity other than as a redeemed shareholder b11 controlled2 is not a personal_holding_company within the meaning of sec_542 c c1 c2 c3 distribution the fair_market_value of the controlled1 stock to be received by distributing3 in distribution will be approximately equal to the fair_market_value of the distributing1 common_stock surrendered by distributing3 no part of the consideration to be distributed by distributing1 in distribution will be received by distributing3 as a creditor employee or in any capacity other than that of a shareholder of distributing1 the five years of financial information submitted on behalf of business a4 conducted by distributing2 a member of the distributing1 separate_affiliated_group sag as defined in sec_355 the distributing1 sag is representative of the present operations of business a4 and there have been no substantial operational changes with respect to the business since the date of the last financial statements submitted plr-124640-12 c4 c5 c6 c7 c8 c9 c10 c11 c12 c13 the five years of financial information submitted on behalf of business a3 conducted by controlled1 is representative of the present operations of business a3 and there have been no substantial operational changes with respect to the business since the date of the last financial statements submitted following distribution other than services provided by sub10 a member of the distributing3 consolidated_group to the distributing1 sag pursuant to management services agreements the distributing1 sag which includes the distributing2 sag defined below will continue the active_conduct of its business independently and with its separate employees following distribution other than services provided by sub10 to controlled1 under an intercompany services agreement and a management services agreement controlled1 will continue the active_conduct of its business independently and with its separate employees distribution will be carried out to facilitate the business purposes distribution is motivated in whole or substantial part by those purposes the transaction is not used principally as a device for distributing the earnings_and_profits e_p of distributing1 or controlled1 or both distributing1 neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of distribution no intercorporate debt will exist between distributing1 and its subsidiaries and controlled1 and its subsidiaries at the time of or subsequent to distribution immediately before 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 -14 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 at the time of distribution distributing1 will not have an excess_loss_account ela in the stock of controlled1 payments made in connection with any continuing transactions between distributing1 and its subsidiaries and controlled1 and its subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length plr-124640-12 c14 c15 c16 c17 c18 c19 c20 c21 immediately after distribution taking into account sec_355 no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of distributing1 or controlled1 who did not hold such an interest immediately before distribution for purposes of sec_355 immediately after 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 distributing1 stock entitled to vote or percent or more of the total value of shares of all classes of distributing1 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 distribution for purposes of sec_355 immediately after 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 controlled1 stock entitled to vote or percent or more of the total value of shares of all classes of controlled1 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 distribution or ii attributable to distributions on distributing1’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 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 other than persons described in sec_355 will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing1 or controlled1 including any predecessor or successor of any such corporation distributing1 and controlled1 each will pay its own expenses if any incurred in connection with distribution no property will be transferred between distributing1 and controlled1 for which an investment_credit under sec_46 has been or will be claimed the effects of dig have not previously been reflected on the distributing3 consolidated group’s consolidated_return the distributing3 consolidated_group has not derived and no taxpayer will derive any federal_income_tax benefit from the first dig transaction that plr-124640-12 d d1 d2 d3 d4 d5 d6 d7 d8 gave rise to dig or the redetermination of the intercompany gain including any adjustment to basis in member stock under sec_1_1502-32 the downstream_merger the downstream_merger is being effected pursuant to the laws of state a and will qualify as a statutory merger under state a law pursuant to the plan of merger and by operation of state a law the following will occur simultaneously at the effective time of the downstream_merger i all of the assets held by distributing1 and all of its liabilities immediately before the merger will become assets and liabilities of distributing2 and ii distributing1 will cease its separate legal existence for all purposes the fair_market_value of the distributing2 stock received by each distributing1 shareholder in the downstream_merger will be approximately equal to the fair_market_value of the distributing1 stock surrendered in exchange therefor at least percent of the proprietary interest in distributing1 will be exchanged for distributing2 stock in the downstream_merger and that proprietary interest will be preserved within the meaning of sec_1_368-1 neither distributing2 nor any person related to distributing2 as defined in sec_1_368-1 has a plan or intention to reacquire any distributing2 stock issued in the downstream_merger for any consideration other than distributing2 stock either directly or through any transaction agreement or other arrangement with any other person distributing2 has no plan or intention to sell or otherwise dispose_of any of the assets of distributing1 acquired in the downstream_merger except for dispositions made in the ordinary course of business or transfers described in sec_368 or sec_1_368-2 the liabilities of distributing1 assumed by distributing2 within the meaning of sec_357 in the downstream_merger and the liabilities to which the transferred assets of distributing1 are subject were incurred by distributing1 in the ordinary course of its business and are associated with the assets transferred following the downstream_merger distributing2 either directly or through members of its qualified_group within the meaning of sec_1_368-1 will continue the historic_business of distributing1 or use a significant portion of distributing1’s historic_business_assets in a business as required and defined in sec_1_368-1 plr-124640-12 d9 d10 d11 d12 d13 d14 d15 d16 d17 e e1 distributing2 distributing1 and the shareholders of distributing1 will each pay their respective expenses if any incurred in connection with the downstream_merger there is no intercorporate indebtedness existing between distributing1 and distributing2 that was issued acquired or will be settled at a discount no two parties to the downstream_merger are investment companies as defined in sec_368 and iv distributing1 is not and will not be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 at the time of the downstream_merger the fair_market_value of the assets of distributing1 transferred to distributing2 will exceed the sum of i the amount of liabilities assumed as determined under sec_357 by distributing2 in connection with the downstream_merger ii the amount of any liabilities owed to distributing2 by distributing1 that are discharged or extinguished in connection with the downstream_merger and iii the amount of any money and the fair_market_value of any other_property other than stock permitted to be received under sec_361 without the recognition of gain received by distributing1 in connection with the downstream_merger immediately after the downstream_merger the fair_market_value of distributing2’s assets will exceed the amount of its liabilities the downstream_merger will be carried out to facilitate the business purposes the downstream_merger is motivated in whole or substantial part by one or more of those purposes the downstream_merger will be undertaken pursuant to a plan_of_reorganization neither the distributing1 preferred_stock nor the distributing2 preferred_stock exchanged therefor will be nonqualified_preferred_stock within the meaning of sec_351 the sub3 redemption there are no outstanding options or warrants to purchase controlled2 stock nor are there any outstanding debentures or other obligations that are convertible into controlled2 stock or would be considered controlled2 stock plr-124640-12 e2 e3 e4 e5 e6 e7 e8 e9 no notes or other obligations of controlled2 will be distributed to sub3 in connection with the sub3 redemption no shareholder of controlled2 has been or will be obligated to purchase any of the stock to be redeemed in the sub3 redemption except as described in the proposed transactions the sub3 redemption will be an isolated transaction and will not be related to any past or future transaction except as described in the proposed transactions or the summary of facts controlled2 has no plan or intention to issue redeem or exchange additional shares of its stock none of the stock to be redeemed in the sub3 redemption is sec_306 stock within the meaning of sec_306 there are no declared but unpaid dividends or funds set apart for dividends on any of the stock to be redeemed in the sub3 redemption there is no plan or intention to completely liquidate controlled2 or to change its classification to anything other than a corporation for u s federal tax purposes at the time of the sub3 redemption the fair_market_value of the consideration to be received by sub3 will be approximately equal to the fair_market_value of the controlled2 stock to be exchanged therefor e10 no part of the proceeds of the sub3 redemption from controlled2 will be received directly or indirectly by sub3 as a creditor employee or in any capacity other than as a redeemed shareholder e11 controlled2 is not a personal_holding_company within the meaning of sec_542 f f1 f2 sub3 liquidation distributing2 on the date of adoption of the sub3 plan_of_liquidation and at all times until the final liquidating_distribution is completed will be the owner of at least percent of the single class of sub3 stock the only property to be distributed to distributing3 in the sub3 liquidation will be cash or cash equivalents plr-124640-12 f3 f4 f5 f6 f7 f8 f9 f10 f11 f12 the fair_market_value of the consideration received by distributing2 and distributing3 for each share of sub3 stock will approximately equal the fair_market_value of that stock no shares of sub3 stock will have been redeemed during the three years preceding the adoption of the sub3 plan of complete_liquidation and no sub3 stock has been the subject of a prior intercompany recognition transaction under sec_1_1502-13 if the sub3 liquidation is effected by conversion following the conversion of sub3 into a llc sub3 will be disregarded as an entity separate from its owner for federal tax purposes under sec_301_7701-3 and the llc will not elect or claim to be treated as a corporation for federal_income_tax purposes all distributions from sub3 to distributing2 and distributing3 pursuant to the plan of complete_liquidation will be made within a single taxable_year of sub3 sub3 will adopt a plan_of_liquidation specifying that the final liquidating_distribution is to be completed within three years from the close of the taxable_year of sub3 in which the first liquidating_distribution is made as soon as its first liquidating_distribution has been made sub3 will cease to be a going concern and its activities will be limited to winding up its affairs paying its debts and distributing its remaining assets to its shareholders sub3 will retain no assets following its final liquidating_distribution sub3 will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the date of adoption of its plan_of_liquidation except as described in the proposed transactions following the sub3 liquidation no assets of sub3 have been or will be disposed of by either sub3 distributing2 or distributing3 except for dispositions in the ordinary course of business or dispositions occurring more than three years prior to adoption of the sub3 plan_of_liquidation except as described in the proposed transactions the liquidation of sub3 will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of sub3 if persons holding directly or indirectly more than percent in value of the sub3 stock also hold directly or indirectly more than percent in value of the stock in recipient for purposes of this representation ownership will be plr-124640-12 determined by application of the constructive_ownership rule_of sec_318 as modified by sec_304 prior to the adoption of the liquidation plan no assets of sub3 will have been distributed in_kind transferred or sold to distributing2 or distributing3 except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to adoption of the liquidation plan sub3 will report all earned_income represented by assets that will be distributed to its shareholders such as receivables being reported on a cash_basis unfinished construction contracts commissions due dividends etc the fair_market_value of the assets of sub3 will exceed its liabilities both at the date of the adoption of its plan of complete_liquidation and immediately prior to the time the first liquidating_distribution is made there is no intercorporate debt existing between distributing2 and sub3 or between distributing3 and sub3 and none has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the date of sub3’s adoption of the plan of complete_liquidation all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the sub3 liquidation have been fully disclosed distributing2 is not and will not be an organization exempt from u s federal_income_tax under sec_501 or any other provision of the code the sub5 contribution no stock_or_securities will be issued for services rendered to or for the benefit of distributing2 in connection with the sub5 contribution and no stock_or_securities will be issued for indebtedness of distributing2 that is not evidenced by a security or for interest on indebtedness of distributing2 that accrued on or after the beginning of the holding_period of sub5 for the debt none of the stock to be transferred in the sub5 contribution is sec_306 stock within the meaning of sec_306 the distributing2 voting preferred_stock will not be nonqualified_preferred_stock within the meaning of sec_351 f13 f14 f15 f16 f17 f18 g g1 g2 g3 plr-124640-12 g4 g5 g6 g7 g8 g9 g10 g11 g12 g13 g14 g15 the transfer of assets to distributing2 in the sub5 contribution is not the result of the solicitation by a promoter broker or investment house sub5 will not retain any rights in the controlled2 common_stock transferred to distributing2 in the sub5 contribution there is no indebtedness between distributing2 and sub5 and there will be no indebtedness created in favor of sub5 as a result of the sub5 contribution the sub5 contribution will occur pursuant to a plan agreed upon before the transaction in which the rights of the parties are defined all exchanges in connection with the sub5 contribution will occur on approximately the same date there is no plan or intention on the part of distributing2 to redeem or otherwise reacquire any stock to be issued in the sub5 contribution taking into account any issuance of additional shares of distributing2 stock any issuance of stock for services the exercise of any distributing2 stock_rights warrants or subscriptions a public offering of distributing2 stock the sale exchange transfer by gift or other_disposition of any of the stock of distributing2 to be received in the exchange and the application of sec_1 sub5 will be in control of distributing2 immediately after the sub5 contribution within the meaning of sec_368 sub5 will receive distributing2 voting preferred_stock approximately equal to the fair_market_value of the controlled2 common_stock transferred to distributing2 in the sub5 contribution except as described in the proposed transactions following the sub5 contribution distributing2 will remain in existence and will retain and use the property transferred to distributing2 in the sub5 contribution in a trade_or_business sub5 has no plan or intention to dispose_of the distributing2 voting preferred_stock following the sub5 contribution each of sub5 and distributing2 will pay its own expenses if any incurred in connection with the sub5 contribution distributing2 will not be an investment_company within the meaning of sec_351 and sec_1_351-1 plr-124640-12 g16 g17 g18 g19 g20 sub5 is not and will not be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 distributing2 will not be a personal_service_corporation within the meaning of sec_269a distributing2 will neither assume nor take any assets subject_to any liabilities in connection with the sub5 contribution the aggregate fair_market_value of the property to be transferred by sub5 to distributing2 in the sub5 contribution will equal or exceed sub5’s aggregate adjusted_basis in such property the total fair_market_value of the assets transferred to distributing2 by sub5 in the sub5 contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by distributing2 in connection with the exchange ii the amount of any liabilities owed to distributing2 by sub5 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 of distributing2 permitted to be received under sec_351 without the recognition of gain received by sub5 in connection with the exchange g21 the fair_market_value of the assets of distributing2 will exceed the amount of its liabilities immediately after the sub5 contribution h h1 h2 h3 h4 h5 the distributing2 redemption there are no outstanding options or warrants to purchase controlled2 stock nor are there any outstanding debentures or other obligations that are convertible into controlled2 stock or would be considered controlled2 stock no notes or other obligations of controlled2 will be distributed to distributing2 in connection with the distributing2 redemption no shareholder of controlled2 has been or will be obligated to purchase any of the stock to be redeemed in the distributing2 redemption except as described in the proposed transactions the distributing2 redemption will be an isolated transaction and will not be related to any past or future transaction except as described in the proposed transactions controlled2 has no plan or intention to issue redeem or exchange additional shares of its stock plr-124640-12 h6 h7 h8 h9 h10 h11 i i1 i2 i3 i4 i5 none of the controlled2 common_stock to be redeemed in the distributing2 redemption is sec_306 stock within the meaning of sec_306 there are no declared but unpaid dividends or funds set apart for dividends on any of the stock to be redeemed in the distributing2 redemption there is no plan or intention to completely liquidate controlled2 or to change its classification to anything other than a corporation for u s federal tax purposes at the time of the distributing2 redemption the fair_market_value of the consideration to be received by distributing2 will be approximately equal to the fair_market_value of controlled2’s stock to be exchanged therefor no part of the proceeds of the distributing2 redemption from controlled2 will be received directly or indirectly by distributing2 as a creditor employee or in any capacity other than as a redeemed shareholder controlled2 is not a personal_holding_company within the meaning of sec_542 the controlled2 recap the fair_market_value of the new controlled2 voting preferred_stock held by sub6 immediately after the controlled2 recap will approximately equal the fair_market_value of the controlled2 series b sec_1504 preferred_stock held by sub6 immediately before the controlled2 recap none of the controlled2 series b sec_1504 preferred_stock to be exchanged in the controlled2 recap will be sec_306 stock within the meaning of sec_306 the only stock that will be actually exchanged in the controlled2 recap will be the controlled2 series b sec_1504 preferred_stock and the only ownership interests that will be issued by controlled2 in the controlled2 recap will be new controlled2 voting preferred_stock controlled2 will issue no cash or other_property in exchange for fractional shares in the controlled2 recap the exchanges contemplated by the controlled2 recap will occur on its effective date plr-124640-12 i6 i7 i8 i9 i10 i11 i12 i13 i14 i15 i16 controlled2 is not and will not be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 after the controlled2 recap all classes of controlled2 stock will be entitled to vote and no shareholder will own controlled2 stock representing sec_368 control of controlled2 except as described in the proposed transactions the controlled2 recap will be a single isolated transaction and not part of a plan to periodically increase the proportionate interest of any shareholder in the assets or e_p of controlled2 immediately before the controlled2 recap the preferred_stock that sub6 will surrender in the controlled2 recap will not entitle sub6 to any accrued but unpaid dividends the accrued dividends will be paid according to the terms of the preferred_stock before the controlled2 recap except as described in the proposed transactions there is no plan or intention to change the capital structure or the corporate charter of controlled2 following the controlled2 recap including i to exercise any conversion rights ii to change the relative voting power of any shareholder or class of shares of controlled2 and or iii to affect any other right created in the controlled2 recap there is no plan or intention to liquidate controlled2 or to change its classification to anything other than a corporation for u s federal tax purposes the controlled2 recap will be carried out to facilitate the business purposes the controlled2 recap is motivated in whole or substantial part by one or more of those purposes the controlled2 recap will be undertaken pursuant to a plan_of_reorganization each party will pay its respective expenses if any incurred in connection with the controlled2 recap at the time of the controlled2 recap controlled2 will not have outstanding any stock_options warrants convertible securities or any other right that is convertible into any class of stock_or_securities of controlled2 there is no plan or intention on the part of controlled2 to redeem or otherwise reacquire any stock to be issued in the controlled2 recap plr-124640-12 i17 i18 i19 i20 i21 i22 j j1 j2 j3 j4 j5 j6 there is no plan or intention on the part of sub6 to sell exchange or otherwise dispose_of the new controlled2 voting preferred_stock issued pursuant to the controlled2 recap controlled2 will be the same entity before and after the controlled2 recap sub6 will not have an election to receive cash or other stock or property pursuant to the controlled2 recap sub6 will not retain any rights in the controlled2 series b sec_1504 preferred_stock transferred to controlled2 pursuant to the controlled2 recap neither the terms of controlled2 series b sec_1504 preferred_stock nor the terms of the new controlled2 voting preferred_stock have or will include a convertibility feature other than pursuant to the controlled2 recap there is no plan or intention to amend controlled2’s corporate charter or certificate of incorporation to alter the rights of the new controlled2 voting preferred_stock or the controlled2 common_stock the distributing3 redemption there are no outstanding options or warrants to purchase controlled2 stock nor are there any outstanding debentures or other obligations that are convertible into controlled2 stock or would be considered controlled2 stock no notes or other obligations of controlled2 will be distributed to distributing3 in connection with the distributing3 redemption no shareholder of controlled2 has been or will be obligated to purchase any of the stock to be redeemed in the distributing3 redemption except as described in the proposed transactions the distributing3 redemption will be an isolated transaction and will not be related to any past or future transaction except as described in the proposed transactions controlled2 has no plan or intention to issue redeem or exchange additional shares of its stock none of the controlled2 stock to be redeemed in the distributing3 redemption is sec_306 stock within the meaning of sec_306 plr-124640-12 j7 j8 j9 j10 j11 j12 k k1 k2 k3 k4 there are no declared but unpaid dividends or funds set apart for dividends on any of the stock to be redeemed in the distributing3 redemption there is no plan or intention to completely liquidate controlled2 or to change its classification to anything other than a corporation for u s federal tax purposes at the time of the distributing3 redemption the fair_market_value of the consideration to be received by distributing3 will be approximately equal to the fair_market_value of controlled2’s stock to be exchanged therefor no part of the consideration received in the distributing3 redemption from controlled2 will be received directly or indirectly by distributing3 as a creditor employee or in any capacity other than as a redeemed shareholder controlled2 is not a personal_holding_company within the meaning of sec_542 following the controlled2 recap and the distributing3 redemption distibuting2 will own controlled2 stock constituting control of controlled2 as that term is defined under sec_368 distribution no part of the consideration to be distributed by distributing2 in distribution will be received by distributing3 as a creditor employee or in any capacity other than that of a shareholder of distributing2 the five years of financial information submitted on behalf of business a4 conducted by distributing2 is representative of the present operations of business a4 and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted on behalf of business a2 conducted by controlled2 and the members of its sag controlled2 sag is representative of the present operations of business a2 and with regard to such businesses there have been no substantial operational changes since the date of the last financial statements submitted neither business a4 conducted by distributing2 nor control of an entity conducting that business was acquired during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part plr-124640-12 k5 k6 k7 k8 k9 k10 k11 k12 k13 k14 k15 neither business a2 conducted by the controlled2 sag nor control of an entity conducting that business was acquired during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with the expansion of business a4 following distribution other than services provided by sub10 a member of the distributing3 consolidated_group to distributing2 under a management services agreement distributing2 will continue the active_conduct of its business independently and with its separate employees following distribution the controlled2 sag will continue the active_conduct of its business independently and with its separate employees distribution will be carried out to facilitate the business purposes distribution is motivated in whole or substantial part by one or more of those purposes distribution will not be used principally as a device for distributing the e_p of distributing2 or controlled2 or both distributing2 neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of distribution except for amounts owed in connection with the ordinary course of business no intercorporate debt will exist between distributing2 and its subsidiaries and controlled2 and its subsidiaries at the time of or subsequent to distribution the indebtedness if any owed by controlled2 to distributing2 after distribution will not constitute stock_or_securities immediately before 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 -14 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 at the time of distribution distributing2 will not have an ela in the stock of controlled2 or in the stock of any subsidiary of controlled2 payments made in connection with any continuing transactions between distributing2 and its subsidiaries and controlled2 and its subsidiaries will plr-124640-12 be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length immediately after distribution taking into account sec_355 no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of distributing2 or controlled2 who did not hold such an interest immediately before distribution for purposes of sec_355 immediately after 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 distributing2 stock entitled to vote or percent or more of the total value of shares of all classes of distributing2 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 distribution for purposes of sec_355 immediately after 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 controlled2 stock entitled to vote or percent or more of the total value of shares of all classes of controlled2 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 distribution or ii attributable to distributions on distributing2’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 distribution 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 other than persons described in sec_355 will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing2 or controlled2 including any predecessor or successor of any such corporation distributing2 and controlled2 each will pay its own expenses if any incurred in connection with distribution no property will be transferred between distributing2 and controlled2 in distribution for which an investment_credit under sec_46 has been or will be claimed the effects of dig and dig have not previously been reflected on the distributing3 consolidated group’s consolidated_return k16 k17 k18 k19 k20 k21 k22 plr-124640-12 k23 k24 the distributing3 consolidated_group has not derived and no taxpayer will derive any federal_income_tax benefit from the third or fifth dig transactions that gave rise to dig sec_3 and respectively or the redetermination of the intercompany gain including any adjustment to basis in member stock under sec_1_1502-32 at the time of distribution there will be no accrued but unpaid dividends on any distributing2 preferred_stock any accrued dividends will be paid in cash according to the terms of the distributing2 preferred_stock before distribution k25 the distributing2 preferred_stock will not participate in distribution l l1 m m1 m2 m3 m4 m5 the foreign sale sub6 will transfer full legal_title and all economic rights constituting beneficial_ownership of the assets transferred solely in exchange for cash and or marketable_securities in the foreign sale distribution except for the controlled3 securities the indebtedness if any owed by controlled3 to distributing3 after distribution will not constitute stock_or_securities no part of the consideration to be distributed by distributing3 in distribution will be received by fsub1 as a creditor employee or in any capacity other than that of a shareholder of distributing3 the five years of financial information submitted on behalf of business a1 conducted by distributing3 and members of its sag distributing3 sag is representative of the present operations of business a1 and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted on behalf of business a2 conducted by controlled3 and members of its sag controlled3 sag is representative of the present operations of business a2 and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted neither business a1 conducted by the distributing3 sag nor control of an entity conducting that business was acquired during the five-year period plr-124640-12 m6 m7 m8 m9 m10 m11 m12 m13 ending on the date of distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part neither business a2 conducted by the controlled3 sag nor control of an entity conducting that business was acquired during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with the expansion of business a1 following distribution the distributing3 sag will continue the active_conduct of its business independently and with its separate employees following distribution the controlled3 sag will continue the active_conduct of its business independently and with its separate employees distribution will be carried out for the business purposes distribution is motivated in whole or substantial part by one or more of those purposes distribution will not be used principally as a device for distributing the e_p of distributing3 or its subsidiaries or controlled3 or its subsidiaries or both the total adjusted bases of the assets transferred to controlled3 by distributing3 will equal or exceed the sum of i the total liabilities assumed within the meaning of sec_357 by controlled3 and ii the total amount of money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing3 and transferred by it to its creditors and shareholders in connection with the reorganization the liabilities assumed within the meaning of sec_357 by controlled3 were incurred in the ordinary course of business and were associated with the assets transferred the total fair_market_value of the assets transferred to controlled3 in distribution will exceed the sum of i the amount of liabilities assumed within the meaning of sec_357 by controlled3 in connection with the exchange ii the amount of any liabilities owed to controlled3 by distributing3 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 stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing3 in connection with the exchange the fair_market_value of the assets of controlled3 will exceed the amount of its liabilities immediately after distribution plr-124640-12 m14 m15 m16 m17 m18 m19 m20 m21 m22 distributing3 neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of distribution no income items including accounts_receivable or any item resulting from a sale exchange or disposition of property that would have resulted in income to distributing3 and no items of expense will be transferred to controlled3 if distributing3 has earned the right to receive the income or could claim a deduction for the expense under the accrual or similar method_of_accounting except for the controlled3 securities no intercorporate debt will exist between distributing3 and its subsidiaries and controlled3 and its subsidiaries at the time of or subsequent to distribution immediately before 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 -14 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 ela that distributing3 has in the controlled3 common_stock or the stock of any direct or indirect subsidiary of controlled3 will be included in income immediately before distribution to the extent required by regulations see sec_1_1502-19 payments made in connection with any continuing transactions between distributing3 and its subsidiaries and controlled3 and its subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no party to distribution will be an investment_company as defined in sec_368 and iv immediately after distribution taking into account sec_355 no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of distributing3 or controlled3 who did not hold such an interest immediately before distribution for purposes of sec_355 immediately after 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 distributing3 stock entitled to vote or percent or more of the total value of shares of all classes of distributing3 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 distribution plr-124640-12 m23 m24 m25 m26 m27 m28 m29 m30 for purposes of sec_355 immediately after 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 controlled3 stock entitled to vote or percent or more of the total value of shares of all classes of controlled3 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 distribution or ii attributable to distributions on distributing3’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 distribution 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 other than persons described in sec_355 will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing3 or controlled3 including any predecessor or successor of any such corporation distributing3 and controlled3 each will pay its own expenses if any incurred in connection with distribution distribution will be undertaken pursuant to a plan_of_reorganization no property will be transferred between distributing3 and controlled3 in distribution for which an investment_credit under sec_46 has been or will be claimed neither distributing3 nor controlled3 i was or will be a united_states_real_property_holding_corporation as defined in sec_897 at any time during the five-year period ending on the date of distribution nor ii will be a united_states_real_property_holding_corporation immediately after distribution the controlled3 securities constitute securities for purposes of sec_361 the sum of the aggregate amount of distributing3’s obligations under i fparent note to the extent that the assumption of the obligations under such note is exchanged for controlled3 securities in the distributing3 debt exchange and ii note and note assumed by controlled3 in exchange for controlled2 common_stock in the controlled3 formation will not exceed the weighted quarterly average of the distributing3 debt for the 12-month_period ending at the close of business on the last full business_day before the plr-124640-12 date on which the distributing3 board_of directors initially discussed the potential separation of business a2 from distributing3 a the sub1 liquidation ruling sec_1 b the sub1 liquidation will be treated as a complete_liquidation under sec_332 sec_332 no gain_or_loss will be recognized by distributing3 on the receipt of all the assets and the assumption of the liabilities of sub1 as a result of the sub1 liquidation sec_332 no gain_or_loss will be recognized by sub1 on the distribution of its assets to and the assumption_of_liabilities by distributing3 as a result of the sub1 liquidation sec_337 the basis of each asset received by distributing3 from sub1 as a result of the sub1 liquidation will equal the basis of that asset in the hands of sub1 immediately before the sub1 liquidation sec_334 the holding_period of each asset received by distributing3 from sub1 as a result of the sub1 liquidation will include the period during which sub1 held that asset sec_1223 distributing3 will succeed to and take into account the items of sub1 described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 sec_384 and sec_1502 and the regulations thereunder sec_381 sec_1_381_a_-1 except to the extent sub1’s e_p is reflected in distributing3’s e_p distributing3 will succeed to and take into account the e_p or deficit in e_p of sub1 as of the date of the sub1 liquidation sec_381 sec_1_381_c_2_-1 and sec_1_1502-33 any deficit in the e_p of sub1 or distributing3 will be used only to offset e_p accumulated after the date of the sub1 liquidation sec_381 the sub5 redemption the sub5 redemption will be treated as a distribution_of_property to which sec_301 applies sec_301 and sec_302 plr-124640-12 c the sub5 redemption distribution will be excluded from sub5’s gross_income and the sub5 redemption proceeds will reduce sub5’s basis in its remaining shares of controlled2 common_stock sec_1_1502-13 sec_1_1502-32 and sec_1_302-2 the sub5 redemption will not cause sub5 to recognize gain on its redeemed controlled2 stock or take into account as income or gain its ela if any in its controlled2 common_stock sec_302 sec_1_1502-19 and a the sub5 redemption will not cause distributing2 to take into account any gain attributable to dig sec_1_1502-13 controlled2 will recognize gain_or_loss on each asset other than cash furnished as consideration in the sub5 redemption pursuant to sec_311 and such amounts will be taken into account under the principles of sec_1_1502-13 and with respect to losses sec_267 distribution no gain_or_loss will be recognized by distributing1 on its distribution of controlled1 stock to distributing3 in exchange for a portion of distributing3’s distributing1 common_stock in distribution sec_355 no gain_or_loss will be recognized by distributing3 nor will it otherwise include any amount in income on the receipt of shares of controlled1 stock in exchange for a portion of its distributing1 common_stock in distribution sec_355 the basis of the controlled1 stock in the hands of distributing3 immediately after distribution will be the same as distributing3’s basis in the distributing1 stock surrendered in exchange therefor determined in the manner described in sec_1_358-2 sec_358 distributing3’s holding_period in the controlled1 stock received in distribution will include the holding_period of the distributing1 stock surrendered in exchange therefor provided that distributing3 holds such distributing1 stock as a capital_asset on the date of distribution sec_1223 e_p if any will be properly allocated between distributing1 and controlled1 in accordance with sec_312 and sec_1_312-10 as a result of the downstream_merger the portion of dig reflected in successor asset b will be redetermined to be excluded from gross_income under the commissioner’s discretionary rule_of sec_1_1502-13 plr-124640-12 accordingly the gain attributable to the portion of the first dig transaction that is reflected in successor asset b will be excluded from distributing1’s gross_income for the distributing3 consolidated group’s consolidated_return_year that includes the date of distribution the amount of dig that is redetermined to be excluded from gross_income will not be taken into account as e_p of any member and will not be treated as tax-exempt_income sec_1_1502-13 the downstream_merger the downstream_merger will qualify as a reorganization within the meaning of sec_368 distributing1 and distributing2 will each be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing1 on its transfer of its assets to distributing2 in exchange for distributing2 stock and distributing2’s assumption of distributing1 liabilities in the downstream_merger sec_361 and sec_357 no gain_or_loss will be recognized by distributing1 on the transfer of distributing2 stock to its shareholders in the downstream_merger sec_361 no gain_or_loss will be recognized by distributing2 on its receipt of distributing1’s assets in exchange for distributing2 common and preferred_stock in the downstream_merger sec_1032 distributing2’s basis in distributing1’s assets will equal distributing1’s basis in its assets immediately before the downstream_merger sec_362 the holding_period of each asset received by distributing2 from distributing1 as a result of the downstream_merger will include the holding_period during which distributing1 held that asset sec_1223 no gain_or_loss will be recognized by distributing3 sub4 or sub9 on each exchange of distributing1 common_stock solely for distributing2 common_stock or distributing1 preferred_stock solely for distributing2 preferred_stock in the downstream_merger sec_354 the basis that each of distributing3 sub4 and sub9 has in the distributing2 common and or preferred_stock received in the downstream_merger will be equal to the basis of the distributing1 stock each of distributing3 sub4 and sub9 exchanged in the downstream_merger sec_358 sec_1_358-2 d plr-124640-12 e the holding_period for each of distributing3 sub4 and sub9 in the distributing2 common and or preferred_stock received in the downstream_merger will include the holding_period of the distributing1 stock held by each of distributing3 sub4 and sub9 respectively provided that each held such distributing1 stock as a capital_asset on the date of the downstream_merger sec_1223 distributing2 will succeed to and take into account as of the close of the effective date of the downstream_merger the items of distributing1 described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 sec_384 and sec_1502 and the regulations thereunder sec_381 sec_1_381_a_-1 the downstream_merger will not cause distributing1 distributing2 or sub5 to take into account any gain attributable to dig sec_1 through sec_1 c and j the downstream_merger will result in distributing2 becoming a successor person to distributing1 under sec_1_1502-13 the sub3 redemption the sub3 redemption will be treated as a distribution_of_property to which sec_301 applies sec_301 and sec_302 the sub3 redemption distribution will be excluded from sub3’s gross_income and the sub3 redemption proceeds will reduce sub3’s basis in its remaining shares of controlled2 common_stock sec_1_1502-13 sec_1_1502-32 and sec_1_302-2 the sub3 redemption will not cause sub3 to recognize gain on its redeemed controlled2 common_stock or take into account as income or gain its ela if any in its controlled2 common_stock sec_302 sec_1_1502-19 and a the sub3 redemption will not cause distributing2 to take into account any gain attributable to dig sec_1_1502-13 and f controlled2 will recognize gain_or_loss on each asset other than cash furnished as consideration in the sub3 redemption pursuant to sec_311 and such amounts will be taken into account under principles of sec_1_1502-13 and with respect to losses sec_267 plr-124640-12 f the sub3 liquidation the sub3 liquidation will be treated as a complete_liquidation under sec_332 sec_332 no gain_or_loss will be recognized by distributing2 on the receipt of the assets and the assumption of the liabilities of sub3 as a result of the sub3 liquidation sec_332 no gain_or_loss will be recognized by distributing3 on the receipt of cash as a result of the sub3 liquidation sec_332 sec_1_1502-34 no gain_or_loss will be recognized by sub3 on the distribution of its assets to and the assumption_of_liabilities by distributing2 as a result of the sub3 liquidation sec_336 and sec_337 no gain_or_loss will be recognized by sub3 on the distribution of cash to distributing3 in redemption of distributing3's sub3 stock sec_336 the basis of each asset received by distributing2 from sub3 as a result of the sub3 liquidation will equal the basis of that asset in the hands of sub3 immediately before the sub3 liquidation sec_334 the basis of the cash received by distributing3 from sub3 in redemption of distributing3's sub3 stock will equal its fair_market_value at the time of the distribution sec_334 the holding_period of each asset received by distributing2 from sub3 as a result of the sub3 liquidation will include the holding_period during which sub3 held that asset sec_1223 distributing2 will succeed to and take into account the items of sub3 described in sec_381 in accordance with sec_1_1502-80 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 sec_1_381_a_-1 and sec_1_1502-80 except to the extent sub3’s e_p is reflected in the e_p of distributing2 and or distributing3 respectively distributing and distributing3 will succeed to and take into account the e_p or deficit in e_p of sub3 as of the date of the sub3 liquidation in accordance with sec_1_1502-80 sec_381 sec_1_381_c_2_-1 sec_1_1502-33 and sec_1_1502-80 any deficit in the e_p of sub3 or distributing2 can be used only to offset e_p accumulated after the date of the sub3 liquidation sec_381 plr-124640-12 g h the sub3 liquidation will not cause distributing2 to take into account any gain attributable to dig sec_1_1502-13 and j the sub5 contribution no gain_or_loss will be recognized by sub5 on its transfer of controlled2 common_stock to distributing2 in the sub5 contribution sec_351 and sec_357 no gain_or_loss will be recognized by distributing2 on its issuance of distributing2 voting preferred_stock in exchange for controlled2 common_stock in the sub5 contribution sec_1032 sub5’s basis or ela as the case may be in its distributing2 voting preferred_stock following the sub5 contribution will be the same as sub5’s basis or ela in the controlled2 common_stock surrendered in exchange therefor sec_358 sub5’s holding_period in the distributing2 voting preferred_stock received in the sub5 contribution will include the holding_period of the controlled2 common_stock it exchanged provided that sub5 holds such controlled2 common_stock as a capital_asset on the date of the sub5 contribution sec_1223 distributing2’s basis or ela as the case may be in the controlled2 common_stock to be received from sub5 in the sub5 contribution will equal sub5’s basis in the controlled2 common_stock immediately before the sub5 contribution sec_362 distributing2’s holding_period in the controlled2 common_stock to be received from sub5 in the sub5 contribution will include the period during which sub5 held such stock immediately before the sub5 contribution sec_1223 the distributing2 voting preferred_stock to be received by sub5 in the sub5 contribution will be a successor asset to the controlled2 common_stock the dig stock which was held by sub5 sec_1_1502-13 the sub5 contribution will not cause distributing2 to include in income any gain attributable to dig sec_1_1502-13 and j the distributing2 redemption plr-124640-12 i the distributing2 redemption will be treated as a distribution_of_property to which sec_301 applies sec_301 and sec_302 the distributing2 redemption distribution will be excluded from distributing2’s gross_income and the distributing2 redemption proceeds will reduce distributing2’s basis in its remaining shares of controlled2 common_stock sec_1_1502-13 sec_1_1502-32 and sec_1_302-2 the distributing2 redemption will not cause distributing2 to recognize gain on its redeemed controlled2 common_stock or take into account as income or gain its ela if any in its controlled2 common_stock sec_302 sec_1_1502-19 and a the distributing2 redemption will not cause distributing2 to take into account any gain attributable to dig dig or dig with respect to controlled2 common_stock sec_1_1502-13 and f controlled2 will recognize gain_or_loss on each asset other than cash furnished as consideration in the distributing2 redemption pursuant to sec_311 and such gains or losses will be taken into account under the principles of sec_1_1502-13 and with respect to losses sec_267 until taken into account after distribution the controlled2 recap the controlled2 recap will qualify as a recapitalization and therefore a reorganization within the meaning of sec_368 controlled2 will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by controlled2 on the receipt of the controlled2 series b sec_1504 preferred_stock in exchange for the new controlled2 voting preferred_stock sec_1032 no gain_or_loss will be recognized by sub6 upon the exchange of its controlled2 series b sec_1504 preferred_stock for the new controlled2 voting preferred_stock sec_354 the basis of the new controlled2 voting preferred_stock received by sub6 will equal the basis of the controlled2 series b sec_1504 preferred_stock surrendered in exchange therefor sec_358 sub6’s holding_period in its new controlled2 voting preferred_stock received in the controlled2 recap will include the period during which sub6 held plr-124640-12 j k controlled2 series b sec_1504 preferred_stock surrendered in exchange therefor sec_1223 the distributing3 redemption the distributing3 redemption will be treated as a distribution_of_property to which sec_301 applies sec_301 and sec_302 the distributing3 redemption distribution will be excluded from distributing3’s gross_income and controlled2’s assumption of note will reduce distributing3’s basis in its remaining shares of controlled2 common_stock sec_1_1502-13 sec_1_1502-32 and sec_1_302-2 the distributing3 redemption will not cause distributing3 to recognize gain on its redeemed controlled2 common_stock or take into account as income or gain its ela if any in its controlled2 common_stock sec_302 sec_1_1502-19 and a the distributing3 redemption will not cause distributing2 to take into account any gain attributable to dig with respect to controlled2 common_stock sec_1_1502-13 and f distribution no gain_or_loss will be recognized by distributing2 on its distribution of controlled2 common_stock in distribution sec_355 no gain_or_loss will be recognized by distributing3 nor will it otherwise include any amount in income on the receipt of shares of controlled2 common_stock in distribution sec_355 the basis of the distributing2 common_stock and controlled2 common_stock in the hands of distributing3 immediately after the distribution will be the same as distributing3’s basis in the distributing2 common_stock held immediately before distribution allocated in proportion to the fair_market_value of distributing2 and controlled2 in accordance with sec_1_358-2 sec_358 immediately before distribution in connection with the investment adjustments required under sec_1_1502-32 distributing2 will utilize its basis in shares of controlled2 common_stock to reduce or eliminate its ela if any in other shares of controlled2 common_stock sec_1_1502-19 plr-124640-12 l m distributing3’s holding_period in the controlled2 common_stock received in distribution will include the holding_period of the distributing2 common_stock with respect to which distribution is made provided that distributing3 holds such distributing2 common_stock as a capital_asset on the date of distribution sec_1223 e_p if any will be properly allocated between distributing2 and controlled2 sec_312 sec_1_312-10 distributing2 as a successor to distributing1 in the first dig transaction and the third dig transaction under sec_1_1502-13 will take into account the portion of dig not reflected in successor asset b see ruling and all of dig on the distribution of the controlled2 common_stock in distribution sec_1_1502-13 and such gain will be redetermined under sec_1 c i to be excluded from gross_income sec_1_1502-13 distributing2 as successor to sub3 in the fifth dig transaction under sec_1_1502-13 will take into account dig on the distribution of controlled2 common_stock in distribution sec_1_1502-13 and such gain will be redetermined under sec_1_1502-13 to be excluded from gross_income sec_1_1502-13 except as expressly provided in rulings and distributing2’s deferred intercompany gains with respect to the stock of controlled2 will be taken into account under the principles of sec_1_1502-13 sec_1_1502-13 f and j the foreign sale sub6 will recognize gain_or_loss on each asset exchanged in the foreign sale equal to the amount_realized less sub6's basis in such assets sec_61 and sec_1001 any loss recognized by sub6 on the foreign sale will be taken into account under the rules of sec_267 distribution the controlled3 transfer followed by distribution will collectively qualify as a reorganization within the meaning of sec_368 distributing3 and controlled3 will each be a_party_to_a_reorganization within the meaning of sec_368 plr-124640-12 no gain_or_loss will be recognized by distributing3 with respect to the controlled3 transfer sec_357 and sec_361 no gain_or_loss will be recognized by controlled3 on the issuance of its stock in exchange for controlled2 common_stock in the controlled3 transfer sec_1032 controlled3’s basis in each asset received in the controlled3 transfer will be the same as the basis of that asset in the hands of distributing3 immediately before the controlled3 transfer sec_362 controlled3’s holding_period for each asset received in the controlled3 transfer will include the period during which distributing3 held that asset sec_1223 no gain_or_loss will be recognized by distributing3 on its transfer of the controlled3 stock to fsub1 in distribution sec_361 no gain_or_loss will be recognized by distributing3 on its transfer of controlled3 securities in repayment of a portion of the fparent note in the distributing3 debt exchange sec_361 no gain_or_loss will be recognized by fsub1 nor will it otherwise include any amount in income on the receipt of shares of controlled3 stock in distribution sec_355 the basis of the distributing3 stock and the controlled3 stock in the hands of fsub1 immediately after distribution will be the same as the basis in the distributing3 stock held by fsub1 immediately before distribution allocated in proportion to the fair_market_value of distributing3 and controlled3 in accordance with sec_1_358-2 sec_358 fsub1’s holding_period in the controlled3 stock received in distribution will include the holding_period of the distributing3 stock with respect to which distribution is made provided that fsub1 holds such distributing3 stock as a capital_asset on the date of distribution sec_1223 e_p if any will be properly allocated between distributing3 and controlled3 sec_312 sec_1_312-10 and sec_1_1502-33 except for purposes of sec_355 payments made between any of distributing3 and controlled3 and their respective affiliates under any separation agreement regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period ending on or before plr-124640-12 distribution and ii will not become fixed and ascertainable until after distribution will be viewed as occurring before distribution 344_us_6 revrul_83_73 1983_1_cb_84 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax treatment of the proposed transactions under other provisions of the code or the regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transactions that is not specifically covered by the above rulings in particular except as so provided no opinion is expressed or implied regarding i ii iii whether the distributions satisfy the business_purpose requirement of sec_1_355-2 whether the distributions are being used principally as devices for the distribution of the earnings_and_profits of distributing1 distributing distributing3 controlled1 controlled2 controlled3 or any combination thereof see sec_355 and sec_1_355-2 whether the distributions are part of a plan or 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 distributing1 distributing2 distributing3 controlled1 controlled2 or controlled3 see sec_355 and sec_1_355-7 or iv the federal_income_tax consequences if any of steps xii xv xvi or the foreign agreement procedural statements this ruling letter is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this letter_ruling 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 plr-124640-12 in accordance with the power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative sincerely gerald b fleming senior technician reviewer branch office of associate chief_counsel corporate cc