qwhuqdo 5hyhqxh 6huylfh department of the treasury number release date index no do ty legend washington dc person to contact telephone number refer reply to cc ita - plr-123965-01 date date taxpayer former spouse agreement x agreement y divorce decree county dollar_figurex date dear this is in response to a private_letter_ruling request dated date submitted by your authorized representative on your behalf specifically you have requested a ruling that dollar_figurex payments per month to be paid_by you to former spouse is alimony under sec_71 of the internal_revenue_code_of_1986 code and is thus deductible by you as taxpayer under sec_215 of the code the following facts and representations are relevant taxpayer and former spouse were married in subsequently they entered into agreement x paragraph of agreement x states former spouse agrees to sign acknowledge and deliver to taxpayer a deed conveying to taxpayer all of her rights title and interest in and to the farm taxpayer agrees on behalf of himself his heirs and assigns to provide former spouse with an income of dollar_figurex per month commencing on date and continuing so long as she lives that income will constitute former spouse’s separate_property and is not to be considered joint or marital property thereafter taxpayer and former spouse decided to dissolve their marriage and entered into agreement y in agreement y the parties specifically agreed that they plr-123965-01 would separate and that agreement x would constitute part of their separation agreement as that term is used in their state’s divorce statutes accordingly the parties were ultimately granted a divorce pursuant to the divorce decree entered in county divorce decree specifically confirmed ratified and incorporated agreement x and agreement y therein law and analysis sec_71 of the code includes amounts received as alimony or separate_maintenance payments in gross_income under sec_71 the term alimony_or_separate_maintenance_payment means any payment in cash if a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includible in gross_income under this section and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse sec_71 defines divorce_or_separation_instrument as a a decree of divorce or separate_maintenance or a written instrument incident to such a decree b a written_separation_agreement or c a decree not described in subparagraph a requiring a spouse to make payments for the support or maintenance of the other spouse sec_215 provides that an individual shall be allowed as a deduction an amount equal to the alimony or separate_maintenance payments paid during such individual’s taxable_year under sec_215 the term alimony_or_separate_maintenance_payment means any alimony_or_separate_maintenance_payment as defined in sec_71 which is includible in the gross_income of the recipient under sec_71 sec_1 b -1t a-8 of the temporary income_tax regulations provides in part that the spouses may designate that payments otherwise qualifying as alimony or separate_maintenance payments shall be nondeductible by the payor and excludible from gross_income by the payee by so providing in a divorce_or_separation_instrument as defined in sec_71 if a payment satisfies all of the factors set forth in sec_71 then it is alimony if it fails to satisfy any one of the above factors it is not alimony jaffe v commissioner t c memo the facts and representations set forth in your submission indicate that the requirements in subparagraphs a c and d of sec_71 are plr-123965-01 satisfied with respect to the payments of dollar_figurex to be made to former spouse and thus are not in dispute however because paragraph of agreement x which was incorporated into the divorce decree provides that the payments are specifically to be made in exchange for the conveyance by former spouse of her rights title and interest in the farm an issue exists concerning whether such payments have been designated as nonalimony under sec_71 before_1984 only payments that were in the nature of alimony or support as opposed to a property settlement would be treated as alimony under sec_71 102_f3d_842 6th cir aff’g t c memo the labels assigned to payments were not determinative in deciding if a payment was alimony or a division of property 60_tc_685 consequently whether payments constituted support or a property settlement was a matter of the intent of the parties in the deficit_reduction_act_of_1984 pub l n0 sec_422 congress amended sec_71 the intent of congress was to eliminate the subjective inquiries into intent and the nature of payments that had plagued the courts in favor of a simpler more objective test hoover v commissioner supra pincite accordingly the tax_court has repeatedly adhered to the view that where the payments fit the definition of alimony for purposes of sec_71 as amended the intended purpose for the payments is of no consequence see baker v commissioner t c memo nelson v commissioner t c memo cash payments will meet sec_71 only if they are not designated in the divorce_or_separation_instrument as payments which are not includible in gross_income under sec_71 and not deductible under sec_215 however the tax_court in 112_tc_317 concluded that for purposes of sec_71 a designation in the instrument need not specifically refer to sec_71 and sec_215 in that case the court found that the provisions in the divorce instrument governing the payments in issue mandated nonalimony treatment even though sec_71 and sec_215 were not mentioned the divorce instrument provided as follows the parties intend and agree that all transfers of property as provided for herein are subject_to the provisions of sec_1041 internal_revenue_code of as amended entitled treatment of transfers of property between spouses or incident_to_divorce and that they shall be accounted for and reported on his or her respective individual income_tax returns in such a manner so that no gain_or_loss shall be recognized as a result of the division and transfer of property as provided for herein each party shall file his or her federal and state tax returns and report his or her income and losses thereon consistent with the foregoing intent of reporting plr-123965-01 the division and transfers of property as a non-taxable event the references to sec_1041 and the nontaxable nature of the payments were sufficient for the court to conclude that there was a clear explicit and express direction that the monthly payments were not to be includible in the recipient’s income t c pincite therefore the payments were designated nonalimony under sec_71 accordingly for payments to be designated as nonalimony under sec_71 the instrument must contain a clear explicit and express direction that they are not to be treated as income in the absence of such an express designation and if the other conditions set forth above are satisfied the payments are considered alimony for federal_income_tax purposes 125_f3d_551 7th cir aff’g t c memo for instance in baker v commissioner t c memo petitioner and her former husband were granted a divorce under the judgment of divorce paragraph titled property settlement reads in relevant part beginning date the plaintiff shall pay the defendant fifty percent of his monthly gross military retirement pay from the u s army each month as a property settlement until such time as she remarries or co-habitates with another person or until her death the petitioner argued that the payments she received from the military retirement_plan were in furtherance of a division of property and should be excluded from income under sec_1041 the tax_court however rejected this argument because the provisions of the judgment of divorce did not specifically address the federal_income_tax consequences of the payments on the parties the court found that the labeling of the payments as a property settlement with nothing more is not a clear explicit and express direction that the payments are not includible in petitioner’s gross_income and are not deductible by the payor as a consequence the court concluded that the above language did not constitute a valid nonalimony designation for purposes of sec_71 the payments were held to constitute alimony under sec_71 in this case the language in paragraph of agreement x suggests that the payments of dollar_figurex to former spouse are in exchange for former spouse’s rights title and interest in farm however no mention is made of the federal_income_tax consequences of such payments accordingly the relevant documents do not contain the submission contains an order from the circuit_court for county specifically finding that the payments of dollar_figurex constitute consideration for the former spouse’s interest in certain real_estate and is not spousal support the court in that order explicitly stated that it makes no finding regarding the characterization of these payments for federal or state_income_tax purposes accordingly that order does not contain a clear explicit and express direction that the payments of dollar_figurex are not to be plr-123965-01 a clear explicit and express direction that the payments of dollar_figurex are not to be includible in former spouse’s gross_income or deductible to taxpayer we therefore conclude that the payments of dollar_figurex to be made to former spouse meet all of the requirements of sec_71 of the code accordingly we rule that the payments of dollar_figurex to be made to former spouse by taxpayer are alimony or separate_maintenance within the meaning of sec_71 of the code and thus are deductible to taxpayer under sec_215 if as and when such payments are made caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter a copy of this letter must be attached to any income_tax return to which it is relevant we enclose a copy of the letter for this purpose this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s stephen j toomey assistant to branch chief branch office of associate chief_counsel income_tax accounting treated as income or alimony for federal_income_tax purposes it is therefore not determinative of the issue in this private_letter_ruling request


id office uilc cca_2012081010091619 ------------------ number release date from --------------------- sent friday date am to ----------------- cc subject re ------ united states- israeli tax_treaty article sec_2 this is in response to your inquiry concerning the application of article the so-called tie-breaker rule_of the u s -israel income_tax treaty to an individual who is a citizen of both the united_states and israel we agree that a u s citizen who has a permanent home in israel may be deemed to be a resident of israel solely for purposes of the treaty under article a under the saving clause in article however we generally retain the right subject_to limited exceptions in article to tax our citizens as if the treaty had not come into effect it has been suggested that a u s citizen who is treated as a resident of israel under the tie-breaker rule_of the treaty may be treated as a nonresident_alien nra for purposes of computing his u s income_tax_liability this rule is found in sec_301_7701_b_-7 of the regulations which applies only to alien individuals and not to u s citizens the first sentence of the section of the regulations provides that t he application of this section shall be limited to an alien individual who is a dual_resident_taxpayer pursuant to a provision of a treaty that provides for resolution of conflicting claims of residence by the united_states and its treaty partner emphasis added a u s citizen who is treated as a resident of another country under an income_tax treaty would still be required to file a form_1040 assuming his income meets the filing thresholds and would still be subject_to u s tax on his worldwide income except to the extent one of the exceptions to the saving clause applies


internal_revenue_service number release date index number ---------------------------------- ------------------------------------------- ---------------------------------------------- -------------------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------- id no ---------------- telephone number ---------------------- refer reply to cc psi b01 plr-113445-17 date date x --------------------------------------------------- -------------------------------------- sub ------------------------------------------------------- ------------------------ state date date date date -------------- ------------------ --------------------------- -------------------- -------------------- dear --------------- this responds to a letter dated date and supplemental correspondence submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code the code facts according to the information submitted and representations made within x was formed and made an s election effective date under the laws of state sub was formed under the laws of state on date on date x acquired all of the outstanding equity interests of sub from the prior owner of those interests plr-113445-17 x’s s_corporation_election was ineffective because x failed to obtain all required shareholder consents to the election additionally x represents an amendment to its operating_agreement on date created a second class of stock x represents that it has amended its operating_agreement to correct all second class of stock issues x elected to treat sub as a qualified_subchapter_s_subsidiary qsub effective date because x’s s_corporation_election was ineffective x’s election to treat sub as a qsub was also ineffective x represents that the invalidity of its s election was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x represents that all of x’s distributions to shareholders have been pro_rata in accordance with their ownership interests x also represents that x and its shareholders agree to make any adjustments required as a condition of obtaining relief under the inadvertent invalid election rule as provided under sec_1362 that may be required by the secretary x and its shareholders represent that they have filed all returns consistently with x being an s_corporation and sub being a qsub law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that if an election under subsection a or sec_1361 by any corporation a was not effective for the taxable_year for which made determined without regard to subsection b by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under paragraph or of subsection d or sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken a so that the corporation for which the election was made or the termination occurred is a small_business_corporation or a qualified_subchapter_s_subsidiary as the case may be or b to acquire the required shareholder consents and the corporation for which the election was made or the termination occurred plr-113445-17 and each person who was a shareholder in such corporation at any time during the period specified pursuant to this subsection agrees to make such adjustments consistent with the treatment of such corporation as an s_corporation or a qualified_subchapter_s_subsidiary as the case may be as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation or a qualified_subchapter_s_subsidiary as the case may be during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election and x’s election to treat sub as a qsub were ineffective on date and date respectively we further conclude that the ineffectiveness of x’s s_corporation_election and sub’s qsub election constituted inadvertent invalid elections within the meaning of f therefore x will be treated as an s_corporation effective date and thereafter provided x’s s_corporation_election is otherwise valid and is not otherwise terminated under sec_1362 furthermore sub will be treated as a qsub of x from date and thereafter provided that sub’s qsub election was otherwise valid and not otherwise terminated under b c except as specifically ruled above we express or imply no opinion as to the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was otherwise a valid s_corporation and whether sub was otherwise a valid qsub this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely laura c fields laura c fields senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


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-136921-13 date date legend parent --------------------------------- -------------------------------------------------------------------- ------------------------------------------------------------- exchange ------------------------------------- sub -------------------------------------------------------------------- ------------------------------------------------------------- ----------------------------------- sub -------------------------------------------------------------------- ------------------------------------------------------------- -------------------------------------------- sub ----------------------------------------------------------------------------------------------------------- ------------------------------------------------------------- --------------------------------------------------------------- sub -------------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------- fsub ------------------------------------------------------------------ -------------------------------------------- fsub ------------------------------------------------------------------- ------------------------------------------------------ plr-136921-13 fsub ------------------------------------------------------------------------- ----------------------------------------------- fsub ----------------------------------------------------------------- ----------------------------------------------------------------------- fsub ------------------------------------------------------------------------- ----------------------------------------------------------------- fsub ----------------------------------------------------------------------- --------------------------------------------------------------------- fdre ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------ distributing -------------------------------------------------------------------------- ------------------------------------------------------------- ---------------------------------------------------------------- distributing ----------------------------------------------------------------------- ------------------------------------------------------------- ---------------------------------------------------- controlled ------------------------------------------------------------------ ---------------------------------------------------------------- controlled --------------------------------------------------------------------------------------- ------------------------------------------------------------- newco ------------------------------------------------------------------------------- --------------------------------------------- state a state b state c -------------- ------------------- ----------------- -------------------------------------------------------------------------------- business a ------------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------- ------------------------------------------------------------------------------ ----------------------------------------------- plr-136921-13 business b -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ ----- ------------------------------------------------------------------------ businesss c --------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------- country a country b country c country d country e country f country g country h country i date date date date a b ------------ --------- ------------- ------------ ------------- ------------------- ----------- ---------------- ----------------------- ------------------------ --------------------------- --------------------------- -------------------------- ---- ------------------------- plr-136921-13 c---------------------------------------- d e f g ---- ----------------------- ---------------------------------------- ---- dear ----------------- this letter responds to your date request for rulings on certain federal_income_tax consequences of a series of proposed transaction described below the proposed transaction the information submitted in that request and in subsequent correspondence is summarized below the rulings contained in this letter are based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material 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 moreover this office has not reviewed any information pertaining to and has made no determination regarding whether any of the distributions described below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or any controlled_corporation or both see sec_355 and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in any distributing_corporation or any controlled_corporation see sec_355 and sec_1_355-7 summary of facts parent a state a corporation is the common parent of an affiliated_group_of_corporations that join in the filing of a consolidated federal_income_tax return the parent group parent has a single class of stock that is publicly traded on exchange parent owns all of the outstanding shares of sub a state a corporation sub owns all of the outstanding shares of distributing a state c_corporation distributing owns all of the outstanding shares of distributing a state b corporation distributing also owns all of the outstanding shares of controlled a country a plr-136921-13 corporation distributing owns all of the outstanding shares of controlled a country b corporation sub also owns all of the outstanding shares of sub a state a corporation sub owns all of the outstanding shares of sub a country c_corporation that is treated as a u s_corporation for federal_income_tax purposes sub owns all the shares of sub a state a corporation sub sub sub sub distributing and distributing join in the filing of the parent group return sub owns all the outstanding shares of fsub a country d corporation fsub owns all the outstanding shares of fsub a country e corporation sub also owns all of the outstanding shares of fsub a country f corporation fsub owns all of the outstanding shares of the following entities fsub a country g corporation fsub a country f corporation and fsub a country h corporation sub distributing and distributing join in the filing of the parent group return distributing through its separate_affiliated_group sag distributing sag is engaged in business a distributing through its separate_affiliated_group sag distributing sag is engaged in business a controlled is engaged in business b controlled is engaged in business c financial data for business a business b and business c shows each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years proposed transaction for what is represented to be valid business reasons parent has proposed and partially completed the following steps of the proposed transaction i ii iii iv on date fsub formed a new private limited_company organized in country i fdre fdre elected to be classified as an entity disregarded as separate from its owner for u s federal_income_tax purposes on date fsub sold a of its shares of fsub to fsub in exchange for a note equal to the amount of b tranche note the tranche note bears interest at a floating rate of c and has a stated maturity of date taxpayer represents that the tranche note is debt for federal_income_tax purposes on date fsub contributed the shares of fsub and fsub to fdre fsub will sell its remaing d interest in fsub2 to fsub in exchange for a note in an amount equal to the value of the fsub shares transferred approximately e the tranche note the tranche note will bear plr-136921-13 interest at a floating rate of f and is expected to have a maturity_date of date v vi fdre will contribute the shares of fsub to fsub fsub will migrate its domicile from country f to country c vii distributing will distribute all of the shares of controlled to sub distribution viii sub will contribute the shares of controlled through successive contributions to sub sub and sub then to fsub in exchange for both voting and non-voting shares of fsub and ultimately to fdre ix x xi distributing will transfer all of the outstanding shares of controlled directly to fdre without receiving any shares or other consideration in exchange therefor the transfer is proposed to be treated for federal_income_tax purposes as a distribution of controlled shares to distributing distribution a distribution of such shares to sub distribution and a series of constructive contributions of the same shares to fdre taxpayer represents that distributing must transfer its shares of controlled in this manner in order to satisfy country b regulatory requirements fsub will form newco a country i corporation treated as a u s_corporation for federal_income_tax purposes fsub will transfer all of its interest in fdre to newco in exchange for newco shares and a promissory note the newco note the newco note will bear interest at a fixed rate consistent with arm’s length terms and is expected to have a stated maturity of g years with the ability to extend or prepay taxpayer represents that the newco note is debt for federal_income_tax purposes representations relating to distribution a b c any indebtedness owed by controlled to distributing after distribution will not constitute stock_or_securities no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation each of distributing and controlled will treat all members of its respective separate affiliated groups as defined in sec_355 the distributing plr-136921-13 d e f g h i j sag and the controlled sag respectively as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied the five years of financial information submitted on behalf of business a conducted by the distributing sag is representative of the present operation of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted the five years of financial information submitted on behalf of business b conducted by the controlled sag is representative of the present operation of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted following distribution the distributing sag will be directly engaged in the active_conduct of business a independently and with its separate employees following distribution the controlled sag will be directly engaged in the active_conduct of business b independently and with its separate employees the distributing sag neither acquired the business a nor acquired control of an entity conducting business a during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized in whole or in part excluding in each case acquisitions that constitute expansions as contemplated by sec_1_355-3 of business a throughout the five-year period preceding distribution the distributing sag will have been the principal_owner of the goodwill if any and significant assets of business a following distribution the distributing sag will continue to be the principal_owner of the goodwill if any and significant assets of business a the controlled sag neither acquired_business b nor acquired control of an entity conducting business b during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized in whole or in part excluding in each case acquisitions that constitute expansions as contemplated by sec_1_355-3 of business b throughout the five-year period preceding distribution the controlled sag will have been the principal_owner of the goodwill if any and significant assets of business b following distribution the controlled sag will be the principal_owner of the goodwill if any and significant assets of business b distribution is carried out for the following corporate business purposes i to achieve meaningful cost savings with respect to regulatory compliance and administration ii to enhance the fit and focus of distributing and controlled and iii to minimize foreign withholding taxes on the movement of capital from controlled and among parent’s worldwide group companies distribution is plr-136921-13 k l m n o p q r motivated in whole or substantial part by one or more of these corporate business purposes no two parties to distribution are investment companies as defined in sec_368 and iv distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction the exception of trade accounts_payable and or with receivable no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to distribution payments made in connection with all continuing transactions between distributing and controlled will be for fair_market_value based on the terms and conditions arrived at by the parties bargaining at arm’s length distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 of the code in distributing or controlled including any predecessor or successor of any such corporation for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of distributing stock entitled to vote or or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of controlled stock entitled to vote or or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined plr-136921-13 in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution immediately after distribution either i no person will hold a or greater interest within the meaning of sec_355 in the stock of distributing or controlled who did not own such an interest before the transaction or ii neither distributing nor controlled is or will be a disqualified_investment_corporation for purposes of sec_355 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 sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d the distribution of controlled stock to distributing 2’s shareholder in distribution is with respect to its ownership of distributing stock distributing controlled and the distributing shareholder each will pay its own or their own expenses if any incurred in connection with distribution neither distributing nor controlled has been or will be a united_states_real_property_holding_corporation within the meaning of sec_897 usrphc at any time during the five-year period ending on the date of distribution and neither distributing nor controlled will be a usrphc immediately after distribution distributing will comply with the reporting procedures established under sec_1_367_b_-5 in order to establish that sub is a corporation for purposes of applying sec_1_367_b_-5 distributing will comply with the reporting procedures established under sec_1_367_e_-1 in order to establish that sub is a qualified us person for purposes of applying sec_1_367_e_-1 sub will be a sec_1248 shareholder with respect to controlled within the meaning of sec_1_1248_f_-1 immediately after distribution sec_1_1248_f_-2 s t u v w x y z aa distribution will be an existing stock_distribution as defined in sec_1_1248_f_-1 to which distributing and sub will elect to apply the provisions of sec_1_1248_f_-2 in accordance with sec_1_1248_f_-2 plr-136921-13 bb immediately after distribution sub will for purposes of sec_1248 and in accordance with sec_1_1248_f_-2 adjust its holding_period in each share of stock of controlled received in distribution such that sub 1’s holding_period in each share is equal to distributing 2’s holding_period in the share at the time of distribution sub will in accordance with sec_1_1248_f_-2 reduce its sec_358 basis as defined in sec_1_1248_f_-1 in each share of stock of controlled received in distribution to the extent that distributing 2’s sec_1248 amount as defined in sec_1_1248_f_-1 with respect to the share exceeds sub 1’s postdistribution amount as defined in sec_1_1248_f_-1 with respect to the share cc at all times before distribution controlled has not been a passive_foreign_investment_company pfic as defined in sec_1297 representations relating to distribution dd ee ff gg hh any indebtedness owed by controlled to distributing after distribution will not constitute stock_or_securities no part of the consideration to be distributed by distributing in distribution will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation each of distributing and controlled will treat all members of its respective separate_affiliated_group as defined in sec_355 the distributing sag and the controlled sag respectively as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied the five years of financial information submitted on behalf of business a conducted by the distributing sag is representative of the corporation’s present operation and with regard to such corporations 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 c conducted by the controlled sag is representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted ii following the transaction the distributing sag will continue the active_conduct of business a independently and with their separate employees plr-136921-13 jj kk ll following the transaction controlled sag will continue the active_conduct of business c independently and with its separate employees the distributing sag neither acquired_business a nor acquired control of an entity conducting business a during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized in whole or in part excluding in each case acquisitions that constitute expansions as contemplated by sec_1_355-3 of business a throughout the five-year period preceding distribution the distributing sag will have been the principal_owner of the goodwill if any and significant assets of business a following distribution the distributing sag will continue to be the principal_owner of the goodwill if any and significant assets of business a the controlled sag neither acquired_business c nor acquired control of an entity conducting business c during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized in whole or in part excluding in each case acquisitions that constitute expansions as contemplated by sec_1_355-3 of business c throughout the five-year period preceding distribution the controlled sag will have been the principal_owner of the goodwill if any and significant assets of business c following distribution the controlled sag will be the principal_owner of the goodwill if any and significant assets of business c mm distribution is carried out for the following corporate business purposes i to achieve meaningful cost savings with respect to regulatory compliance and administration ii to enhance the fit and focus of distributing and controlled and iii to minimize foreign withholding taxes on the movement of capital from controlled and among parent’s worldwide group of companies distribution is motivated in whole or substantial part by one or more of these corporate business purposes nn oo pp no two parties to distribution are investment companies as defined in sec_368 and iv distribution is not used principally as a device for the distribution of the earnings_and_profits of any or all of distributing and controlled distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction qq with the exception of trade accounts_payable and or receivable no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to distribution plr-136921-13 rr ss tt uu vv ww payments made in connection with all continuing transactions between distributing and controlled will be for fair_market_value based on the terms and conditions arrived at by the parties bargaining at arm’s length distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 of the code in distributing or controlled including any predecessor or successor of any such corporation for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of distributing stock entitled to vote or or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of controlled stock entitled to vote or or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution or ii attributable to distributions on distributing 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 immediately after distribution either i no person will hold a or greater interest within the meaning of sec_355 in the stock of distributing or controlled who did not own such an interest before the transaction or ii neither distributing nor controlled is or will be a disqualified_investment_corporation for purposes of sec_355 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 sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d xx the distribution of controlled stock to distributing 1’s shareholder in distribution is with respect to their ownership of distributing stock plr-136921-13 yy zz distributing controlled and the distributing shareholder each will pay its own or their own expenses if any incurred in connection with distribution neither distributing nor controlled has been or will be a united_states_real_property_holding_corporation within the meaning of sec_897 usrphc at any time during the five-year period ending on the date of distribution and neither distributing nor controlled will be a usrphc immediately after distribution aaa distributing will comply with the reporting procedures established under sec_1_367_b_-5 in order to establish that distributing is a corporation for purposes of applying sec_1_367_b_-5 bbb distributing will comply with the reporting procedures established under sec_1_367_e_-1 in order to establish that distributing is a qualified us person for purposes of applying sec_1_367_e_-1 ccc distributing will be a sec_1248 shareholder with respect to controlled within the meaning of sec_1_1248_f_-1 immediately after distribution sec_1_1248_f_-2 ddd distribution will be an existing stock_distribution as defined in sec_1_1248_f_-1 to which distributing and distributing will elect to apply the provisions of sec_1_1248_f_-2 in accordance with sec_1_1248_f_-2 eee immediately after distribution distributing will for purposes of sec_1248 and in accordance with sec_1_1248_f_-2 adjust its holding_period in each share of stock of controlled received in distribution such that distributing 2’s holding_period in each share is equal to distributing 1’s holding_period in the share at the time of distribution distributing will in accordance with sec_1_1248_f_-2 reduce its sec_358 basis as defined in sec_1_1248_f_-1 in each share of stock of controlled received in distribution to the extent that distributing 1’s sec_1248 amount as defined in sec_1_1248_f_-1 with respect to the share exceeds distributing 2’s postdistribution amount as defined in sec_1_1248_f_-1 with respect to the share fff at all times before distribution controlled has not been a passive_foreign_investment_company pfic as defined in sec_1297 representations relating to distribution plr-136921-13 ggg any indebtedness owed by controlled to distributing after distribution will not constitute stock_or_securities hhh no part of the consideration to be distributed by distributing in distribution will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation iii jjj each of distributing and controlled will treat all members of its respective separate_affiliated_group as defined in sec_355 the distributing sag and the controlled sag respectively as one corporation in determining whether the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business are satisfied the five years of financial information submitted on behalf of business a conducted by the distributing sag is representative of the present operation of the business and there have been no substantial operational changes in the business since the date of the last financial statements submitted kkk the five years of financial information submitted on behalf of business c conducted by the controlled sag is representative of the present operation of the business and there have been no substantial operational changes in the business since the date of the last financial statements submitted lll following the transaction the distributing sag will continue the active_conduct of business a independently and with their separate employees mmm following the transaction controlled sag will continue the active_conduct of business c independently and with its separate employees nnn the controlled sag neither acquired_business c nor acquired control of an entity conducting business c during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized in whole or in part excluding in each case acquisitions that constitute expansions as contemplated by sec_1_355-3 of business c throughout the five-year period preceding distribution the controlled sag will have been the principal_owner of the goodwill if any and significant assets of business c following distribution the controlled sag will be the principal_owner of the goodwill if any and significant assets of business c ooo the distributing sag neither acquired_business a nor acquired control of an entity conducting business a during the five-year period ending on the date of distribution in a transaction in which gain_or_loss was recognized in whole or in part excluding in each case acquisitions that constitute expansions as contemplated by sec_1_355-3 of business a throughout the five-year period preceding distribution the distributing sag will have been plr-136921-13 the principal_owner of the goodwill if any and significant assets of business a following distribution the distributing sag will continue to be the principal_owner of the goodwill if any and significant assets of business a ppp distribution is carried out for the following corporate business purposes i to achieve meaningful cost savings with respect to regulatory compliance and administration ii to enhance the fit and focus of distributing and controlled and iii to minimize foreign withholding taxes on the movement of capital from controlled and among parent’s worldwide group of companies distribution is motivated in whole or substantial part by one or more of these corporate business purposes qqq no two parties to distribution are investment companies as defined in sec_368 and iv rrr distribution is not used principally as a device for the distribution of the earnings_and_profits of any or all of distributing and controlled sss distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction ttt with the exception of trade accounts_payable and or receivable no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to distribution uuu payments made in connection with all continuing transactions between distributing and controlled will be for fair_market_value based on the terms and conditions arrived at by the parties bargaining at arm’s length vvv distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 of the code in distributing or controlled including any predecessor or successor of any such corporation www for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of distributing stock entitled to vote or or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution plr-136921-13 xxx for purposes of sec_355 immediately after distribution no person determined after applying sec_355 will hold stock possessing or more of the total combined voting power of all classes of controlled stock entitled to vote or or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of distribution or ii attributable to distributions on distributing 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 yyy zzz immediately after distribution either i no person will hold a or greater interest within the meaning of sec_355 in the stock of distributing or controlled who did not own such an interest before the transaction or ii neither distributing nor controlled is or will be a disqualified_investment_corporation for purposes of sec_355 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 sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d aaaa the distribution of controlled stock to distributing 2’s shareholder in distribution is with respect to its ownership of distributing stock bbbb distributing controlled and the distributing shareholder each will pay its own or their own expenses if any incurred in connection with distribution cccc neither distributing nor controlled has been or will be a united_states_real_property_holding_corporation within the meaning of sec_897 usrphc at any time during the five-year period ending on the date of distribution and neither distributing nor controlled will be a usrphc immediately after distribution dddd distributing will comply with the reporting procedures established under sec_1_367_b_-5 in order to establish that sub is a corporation for purposes of applying sec_1_367_b_-5 eeee distributing will comply with the reporting procedures established under sec_1_367_e_-1 in order to establish that sub is a qualified us person for purposes of applying sec_1_367_e_-1 plr-136921-13 ffff sub will be a sec_1248 shareholder with respect to controlled within the meaning of sec_1_1248_f_-1 immediately after distribution sec_1_1248_f_-2 gggg distribution will be an existing stock_distribution as defined in sec_1_1248_f_-1 to which distributing and sub will elect to apply the provisions of sec_1_1248_f_-2 in accordance with sec_1_1248_f_-2 hhhh immediately after distribution sub will for purposes of sec_1248 and in accordance with sec_1_1248_f_-2 adjust its holding_period in each share of stock of controlled received in distribution such that sub 1’s holding_period in each share is equal to distributing 2’s holding_period in the share at the time of distribution sub will in accordance with sec_1_1248_f_-2 reduce its sec_358 basis as defined in sec_1_1248_f_-1 in each share of stock of controlled received in distribution to the extent that distributing 2’s sec_1248 amount as defined in sec_1_1248_f_-1 with respect to the share exceeds sub 1’s postdistribution amount as defined in sec_1_1248_f_-1 with respect to the share rulings relating to distribution based solely on the information submitted and the representations set forth above and provided that i the distribution of controlled stock to distributing 2’s shareholder in distribution is with respect to its ownership of distributing stock and ii any other transfer of stock money or property between distributing controlled or any distributing shareholder and any person related to distributing controlled or any distributing shareholder is respected as a separate transaction we rule as follows distribution will be considered a distribution described in sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of sub upon receipt of the controlled stock in distribution sec_355 no gain_or_loss will be recognized by distributing on distribution sec_355 the basis of the distributing stock and the controlled stock in the hands of the shareholder of distributing after distribution will be the same as the basis of the distributing stock held by such shareholder allocated between distributing stock and the controlled stock in proportion to the fair market plr-136921-13 value of each in accordance with sec_1_358-1 and sec_1_358-2 sec_358 through c the holding_period of the controlled stock received by the shareholders of distributing will include the holding_period of their distributing stock with respect to which distribution was made provided that such distributing stock is held as a capital_asset on the date of distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 distribution will be an exchange to which sec_1_367_b_-1 -5 a - b i and -5 b apply distributing will not recognize gain_or_loss under sec_367 on distribution sec_1_367_e_-1 distributing will not be required under sec_1_1248_f_-1 to include in gross_income as a dividend the sec_1248 amount with respect to the stock of controlled distributed to sub sec_1_1248_f_-2 rulings relating to distribution based solely on the information submitted and the representations set forth above and provided that i the distribution of controlled stock to distributing 1’s shareholder in distribution is with respect to its ownership of distributing stock and ii any other transfer of stock money or property between distributing controlled or any distributing shareholder and any person related to distributing controlled or any distributing shareholder is respected as a separate transaction we rule as follows distribution will be considered a distribution described in sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of distributing upon the deemed receipt of the controlled stock in distribution sec_355 no gain_or_loss will be recognized by distributing on distribution sec_355 the basis of the distributing stock and the controlled stock in the hands of the shareholders of distributing after distribution will be the same as the basis of the distributing stock held by such shareholder allocated between distributing stock and the controlled stock in proportion to the fair market plr-136921-13 value of each in accordance with sec_1_358-1 and sec_1_358-2 sec_358 through c the holding_period of the controlled stock received by the shareholders of distributing will include the holding_period of their distributing stock with respect to which distribution was made provided that such distributing stock is held as a capital_asset on the date of distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 distribution will be an exchange to which sec_1_367_b_-1 -5 a - b i and -5 b apply distributing will not recognize gain_or_loss under sec_367 on distribution sec_1_367_e_-1 distributing will not be required under sec_1_1248_f_-1 to include in gross_income as a dividend the sec_1248 amount with respect to the stock of controlled distributed to distributing sec_1_1248_f_-2 rulings relating to distribution based solely on the information submitted and the representations set forth above and provided that i the distribution of controlled stock to distributing 2’s shareholder in distribution is with respect to its ownership of distributing stock and ii any other transfer of stock money or property between distributing controlled or any distributing shareholder and any person related to distributing controlled or any distributing shareholder is respected as a separate transaction we rule as follows distribution will be considered a distribution described in sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of sub upon the deemed receipt of the controlled stock in distribution sec_355 no gain_or_loss will be recognized by distributing on distribution sec_355 the basis of the distributing stock and the controlled stock in the hands of the shareholders of distributing after distribution will be the same as the basis of the distributing stock held by such shareholder allocated between distributing stock and the controlled stock in proportion to the fair market plr-136921-13 value of each in accordance with sec_1_358-1 and sec_1_358-2 sec_358 through c the holding_period of the controlled stock received by the shareholders of distributing will include the holding_period of their distributing stock with respect to which distribution was made provided that such distributing stock is held as a capital_asset on the date of distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 distribution will be an exchange to which sec_1_367_b_-1 -5 a - b i and -5 b apply distributing will not recognize gain_or_loss under sec_367 on distribution sec_1_367_e_-1 distributing will not be required under sec_1_1248_f_-1 to include in gross_income as a dividend the sec_1248 amount with respect to the stock of controlled distributed to sub sec_1_1248_f_-2 caveats no opinion is expressed about the federal_income_tax treatment of the proposed transaction under other provisions of the code or regulations or the federal_income_tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding i ii whether any distribution satisfies the business_purpose requirement of sec_1_355-2 whether any distribution is used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or any controlled_corporation or both see sec_355 and sec_1 d iii whether any distribution and any acquisition or acquisitions are part of a plan or series of related transactions under sec_355 iv any and all federal_income_tax consequences relating to steps i through vi viii x and xi of the proposed transaction including the qualification of step vi as a reorganization to which sec_368 applies and of steps ii and xi as transfers to which sec_304 applies plr-136921-13 procedural statements except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely isaac w zimbalist senior technician reviewer office of associate chief_counsel corporate