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 fip b01 plr-122894-12 date february legend taxpayer state year llc lp1 lp2 lp3 trust lp4 lessee a b c d --------------------------------- ------------------------- -------------- ------- ---------------------------------- ------------------------------ -------------------------------- ---------------------------------- ---------------------------- ------------------------------------------------ --------------------- ----- ---- -- ---- plr-122894-12 e f g h i k l m n ---- ---- ----- ----- ---- -------- ---- ---------- ----- dear ------------------ - this is in reply to a letter in which taxpayer requests a ruling in connection with its election to be taxed as a real_estate_investment_trust reit under sections of the internal_revenue_code_of_1986 as amended the code specifically taxpayer requests a ruling that certain payments under the surface lease described below will constitute rents_from_real_property under sec_856 and c facts taxpayer is a state corporation that has elected to be taxed as a reit since year taxpayer owns a percent of llc and b percent of lp1 llc in turn owns c percent of lp1 thus taxpayer owns a percent of lp1 taxpayer also owns a c percent interest in lp2 lp2 owns a d percent interest in lp3 and taxpayer directly owns c percent of lp3 therefore taxpayer directly and indirectly owns approximately e percent of lp3 trust which is not related to taxpayer owns c percent of lp3 trust also owns an f percent interest in lp4 the remaining d percent interest in lp4 is owned by individuals and taxpayer taxpayer or its predecessors have owned directly or indirectly certain real_property for over g years the property includes both surface rights surface land and sub-surface mineral rights mineral rights lp1 and lp4 own the surface land which is approximately h acres lp3 owns the mineral rights underneath the surface land lp3 has no surface rights through easement or otherwise to gain access to the minerals it owns below the surface the split in ownership between the surface land plr-122894-12 and the mineral rights has been in place for over i years and thus pre-dates the reit election of taxpayer lp3 and lessee have entered into a subsurface lease which covers the mineral rights lying beneath the surface land pursuant to which lessee will extract oil_and_gas and other hydrocarbons from the leased land lessee will make royalty payments to lp3 which are determined based on the gross_sales proceeds received for oil_and_gas produced from the leased land multiplied by a royalty percentage lp3 will allocate the royalty payments pro-rata to its partners taxpayer intends to include its share of the royalty payments received by lp3 from lessee under the subsurface lease as non- qualifying_income for purposes of the percent income test under sec_856 and the percent income test under sec_856 the surface land includes an approximately k acre site located within the surface land determined to be the appropriate site for access to the mineral rights drill site the mineral rights however do not include either the surface land or the right to access the surface land taxpayer will purchase an l percent undivided tenant in common tic interest in the drill site from lp4 therefore lp4 and taxpayer will each own an l percent undivided tic interest in the drill site taxpayer and lp4 together as lessors lessors have entered into a lease with lessee granting lessee access to the surface land surface lease pursuant to the surface lease the rent payable by lessee to lessors will be the greater of i dollar_figurem per month or ii n percent of the gross sale proceeds received by lessee of all oil_and_gas produced at the premises and sold by lessee during the applicable_month less a small transportation cost taxpayer represents that rental payments due under the surface lease are at arm’s-length terms and at fair_market_value rental payments pursuant to the surface lease are not dependent on the net profits of lessee the surface lease is a triple net_lease in addition to the rent payable to the lessors lessee pays all taxes insurance and maintenance_expenses that arise from the use of the drill site the surface lease does not give lessors the right to or control_over any mineral rights under the surface lease lessors expressly grant lessee the right to raze the existing premises for purposes of conducting oil_and_gas operations subject_to restoration requirements at the end of the surface lease taxpayer represents that the surface lease and subsurface lease are separate contracts which where independently negotiated and are based on independent business reasons and economics law and analysis plr-122894-12 whether amounts received from the surface lease constitute rents_from_real_property sec_856 provides that to qualify as a reit for any taxable_year under part ii of subchapter_m an entity must derive at least percent of its gross_income excluding gross_income from prohibited_transactions from the sources listed in sec_856 which includes rents_from_real_property and at least percent of its gross_income excluding gross_income from prohibited_transactions from sources listed in sec_856 which also includes rents_from_real_property sec_856 provides that subject_to the exclusions in sec_856 the term rents_from_real_property includes among other things rents from interests_in_real_property in turn sec_856 provides that the term interests_in_real_property includes fee ownership and co-ownership of land or improvements thereon but does not include mineral oil or gas royalty interests sec_1_856-3 provides that a reit that is a partner in a partnership is deemed to own its proportionate share of each of the assets of the partnership and will be deemed to be entitled to the income of the partnership attributable to such share the character of the various assets in the hands of the partnership and items of gross_income of the partnership remains the same in the hands of the partners for all purposes of sec_856 sec_1_856-4 provides that subject_to the exceptions of sec_856 and sec_1_856-4 the term rents_from_real_property means generally the gross amounts received for_the_use_of or the right to use real_property of the reit sec_856 provides that subject_to certain exceptions the term rents_from_real_property does not include any amount received or accrued with respect to any real or personal_property if the determination of such amount depends in whole or in part on the income or profits derived by any person from such property except that any amount so received or accrued shall not be excluded from the term ‘rents from real property’ solely by reason of being based on a fixed percentage or percentages of receipts or sales sec_1_856-4 provides that an amount received or accrued as rent which consists in whole or in part of one or more percentages of the lessee’s receipts or sales in excess of determinable dollar amounts may qualify as rents_from_real_property if i the determinable amounts do not depend on the income or profits of the lessee and ii the percentages and determinable amounts are fixed at the time the lease is entered into and are not renegotiated during the term of the lease in a manner which has the effect of basing rent on income or profits it further provides that an amount will not qualify as rents_from_real_property if considering the lease and all the surrounding circumstances the arrangement does not conform with normal business practice but is in reality used as a means of basing rent on income or profits plr-122894-12 the legislative_history underlying the tax treatment of reits indicates that the central concern behind the gross_income restrictions is that a reit's gross_income should largely be composed of passive_income for example h_r rep no 86th cong 2d sess pincite 1960_2_cb_819 pincite states o ne of the principal purposes of your committee in imposing restrictions on types of income of a qualifying real_estate_investment_trust is to be sure the bulk of its income is from passive_income sources and not from the active_conduct_of_a_trade_or_business revrul_64_75 1964_1_cb_228 holds that where the owner of undivided interests in mineral-bearing real_property subject_to leases under which the minerals are extracted in exchange for payments that are determined primarily by reference to the amount of minerals mined the owner's interests in the real properties are mineral royalty interests rather than real_estate_assets for purposes of sec_856 and revenues derived from its leases do not qualify as rents_from_real_property under sec_856 and the owner's property interest was deemed a mineral oil or gas royalty interest because the receipts fell within the normal and ordinary meaning of the term ‘royalty ’ in 86_f3d_1526 9th cir the court found that the ordinary meaning of the term royalty is a payment made to the owner of property for permitting another to use the property and that t he payment is typically a percentage of profits or a specified sum per item sold the property is typically either an intangible_property right or a right relating to the development of natural_resources therefore the court found that it was the nature of the property the owner is permitting another to use that differentiates royalty from rent id pincite n the court based its conclusion on definitions of royalty in webster's ninth new collegiate dictionary share of the product or profit reserved by the grantor especially of an oil or mining lease and black's law dictionary compensation_for the use of property usually copyrighted material or natural_resources and a share of product or profit reserved by owner for permitting another to use the property id pincite the rent payable pursuant to the surface lease is compensation_for the use of or right to use real_property further taxpayer represents that the rents it received in exchange for lessee’s right to use the drill site were negotiated at arm’s length and comprise the greater of a fixed rental amount or percentage rents based on gross_sales proceeds thus qualifying such percentage rents for the parenthetical exception contained in sec_856 such rents would not constitute prohibited royalty payments as defined by sierra club inc and revrul_64_75 because the property covered by the surface lease does not include the oil_and_gas on which the rents are based the surface lease rents are not amounts reserved by lessors for permitting lessee to extract the oil_and_gas because the lessors do not own the oil_and_gas upon which the rents are calculated rather the surface lease rents are compensation solely for_the_use_of the surface land therefore the amounts paid to taxpayer with plr-122894-12 respect to the surface lease constitute rents_from_real_property under sec_856 and c this ruling’s application is limited to the facts representations code sections and regulations cited herein because there is some overlap in ownership between the owners of the surface land and mineral rights the contingent payment set forth under the surface lease must reflect an arm’s length value no opinion is expressed with regard to whether the surface lease payments are based on arm’s-length terms and at fair_market_value in addition no opinion is expressed with regard to whether taxpayer otherwise qualifies as a reit under subchapter_m of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely robert a martin robert a martin sr tech reviewer branch office of associate chief_counsel financial institutions and products enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c sin so so g oo - oo -00 s contact person identification_number telephone number tft f0 b employer_identification_number é l w d x dear sir or madam this is in response to a request for rulings regarding the federal_income_tax consequences of your proposed activity of investing in foreign financial institutions under the circumstances described below facts you were established for the primary purpose of empowering poor entrepreneurs in developing countries to start or expand their own businesses and to create additional job opportunities for other indigent individuals in these countries you accomplish your goal by working with a number of nongovernmental not-for-profit_organizations ngo's that serve the poor in a number of third world countries these ngo's are independent organizations comprised of local residents ’ sinesspersons ‘and clergy of local churches who work with the poor in their respective countries and who identify eligible_loan recipients you are supported in your grant-making activities by not-for- profit organizations established in certain developed countiies no you solicit contributions from individuals businesses and private_foundations you also receive grants from the world bank and several u s governmental agencies including the u s agency for international development you in turn use the funds to provide grants to the ngo's the ngo's use the funds to provide unsecured micro- enterprise loans and business training to needy persons as well as to support ongoing ngo activities including their operating_expenses you execute an agreement with the ngo receiving the grant that stipulates how the funds must be used including criteria in choosing recipients of the loans and reporting requirements the ngo's must submit to you regular reports regarding the use of the funds the agreement usually requires that payments made on account of any advances be maintained in a revolving loan fund so that the repaid amounts can then be loaned to others at the present time you provide direct grants to the foreign ngo's imposing restrictions that will ensure that the funds are used for charitable purposes in accordance with the standards set forth in sec_501 of the code these grants are permanently transferred and you do not receive any interest dividends or other return_of_capital with respect to such grants during the last two calendar years you made over 323x and 426x loans totaling approximately dollar_figurey and dollar_figurey respectively the average loan was approximately dollar_figure percent of these loans were made to women ' the ngo's in third world countries discussed above and the nonprofit this entity created under the laws of b but operated out of your organizations in the developed countries have formed an international association under the name a headquarters provides a united international front for your charitable giving in third world countries in addition to serving as the principal financial contributor of a you also furnish a significant amount of administrative support to a providing additional oversight to ensure that the lending program is carried out in an efficient and effective manner currently the laws of most foreign countries significantly restrict the level of financial activities in which the nonprofit_organizations may engage as a consequence they are unable to provide various forms of banking services that would be useful to the micro-enterprise loan recipients and the ngo's themselves - services such as savings deposits commercial paper inter-banking borrowings and central banking borrowings you cite sources that indicate the ngo's currently serve only about percent of global need through their microloans because the business operated by a clients and the loans provided to them are very small you described a typical situation of a loan to finance a purchase of hemp in bulk that the loan recipient uses to make hand-woven baskets that she will sell in the town market most of the regular banking institutions established in their countries will not accommodate them for example you note that there are few regular financial institutions that are willing to set up savings accounts for people who can only deposit a dollar or two each week and who maintain extremely low account balances you indicate that as a result most of a's loan recipients are forced to hide their profits in their homes or pay high rates to a private money keeper further they receive no interest on any such savings as banks the ngo's can bridge the gap by providing savings services and by using these savings and other sources of capital to reach far more microcredit clients to respond to this problem you will be working with various ngo's to create or convert to regulated financial institutions in their respective countries these entities will be set up as joint stock companies with shareholders however contrary to the usual purpose for which these entities are set up to benefit the shareholders the mission of each of these financial institutions will be consistent with the overall mission of you and a _-- to help the poor by providing affordable access to financial services a sample articles of incorporation provided by you states a primary purpose of carry ing on the business of a thrift bank with a primary microfinance orientation using microfinance as a vehicle or platform to lift people out of poverty and to brea poverty confining attitudes and lifestyles the primary purpose and activity of all the banks in which you will invest will be to make microloans the funds the banks receive will be reinvested by making microloans no significant other investments are contemplated the group loan methodology trust bank will be the banks’ core lending product the methodology will involve a group of bank members who work as a group to co-guarantee each other's microloans which usually have a term of approximately months the members of the group will meet weekly to discuss each other's businesses share experiences and provide mutual emotional support a loan officer of the bank attends this meeting and will bring in others periodically to provide training on a particular issue that the group h expressed a need for the amount of loans to each member goes through an approval process at the group level and at the bank level and this methodology ensures that all loans remain relatively small the loans will be for business development most loans will probably be between dollar_figure to dollar_figure an individual who seeks a loan of a substantial amount will be referred to the local commercial bank a members will conduct client impact assessments to measure the extent to which the training and services provided by the financial institutions are helping the clients you will monitor the poverty focus of the banks through quarterly reports which include a measure of the average loan size normalized to gross domestic product per capita the partners must also undergo an accreditation process once every three years part of this process includes a review of the poverty focus because the ngo's will be converted to or will establish banks you propose to become a shareholder in a number of these financial institutions providing them funding in the form of capital contributions rather than as grants in addition to the capital contributions of you and the a partner additional capital will be solicited from local and international persons or entities however because these financial institutions will not be operated to profit their shareholders it is expected that these other investors will be nonprofit entities with charitable goals similar to those of you and community-minded private investors it is anticipated that the bylaws and shareholder agreements will provide that shareholders will not be allowed to sell their shares without the consent of the board_of directors and no sale will generally be approved unless the proposed purchase has a track record or demonstrated commitment to the concept of microfinancing wedded to life transformation activities as a tool for poverty intervention poverty alleviation and spiritual transformation you will have a voting control in the boards of the banks the policy of a is that any banks that are part of a must have at least percent of their voting shares owned by members of a in many cases thi sec_51 percent is made up of the shares held by you and those held by the local ngo that you helped to create in this way control is held by organizations committed to your mission values and poverty focus with this control the bylaws of each organization will reflect your vision and purpose the directors of the bank will be elected by the shareholders this helps ensure that board members make decisions that are in the best long-term interests of the bank most of the directors will be representing the shares of ngo’s and charitable organizations that are investing in the bank any dividends received by these organizations will go directly into continuing the charitable purpose of the organization the purpose of the current grant agreements with the ngo's is to come to an agreement on shared objectives when you place funds in an unrelated entity with investments in banks you will have voting control in the boards with this control the bylaws of each organization will reflect your vision and mission in many cases you will also have shareholder agreements that detail the purposes of the organization and the procedures for disposing of stock these bylaws and agreements plus an annual planning process with the bank will take the place of the previous grant agreement with the ngo's although the actual process that will be employed in setting up these financial institutions may differ from country to country and your participation and ttiat of your nonprofit foreign partners may be undertaken through separately established nonprofit entities you emphasize that the basic purpose to aid the poor will be paramount you represent that the laws of the country in which such entities will be operated will be respected you request the following rulings the activities of investing in foreign financial institutions described above will not jeopardize your tax-exempt status under sec_501 of the code income from the investments will be characterized as income from activities related to your tax-exempt purposes rather than investment_income for purposes of the support_test of sec_509 and sec_170 of the code income from the investments will not subject you to the tax on unrelated_business_taxable_income under sections of the code applicable law sec_501 of the code describes as exempt as provided under sec_501 organizations organized and operated exclusively for charitable scientific or educational_purposes provided no part of the organization's net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that an organization will be regarded as operated exclusively for exempt purposes only if it engages primarily in activities that accomplish such exempt purposes sec_1_501_c_3_-1 of the regulations provides that the term charitable includes relief of the poor and distressed or of the underprivileged revrul_68_489 1968_2_cb_210 holds that an organization exempt under sec_501 of the code will not jeopardize its exemption even though it distributes funds to non-exempt organizations provided it retains control and discretion as to the use of the funds and maintains records establishing that the funds were used for sec_501 purposes revrul_71_460 1971_2_cb_231 provides that a 501_c_3_organization may conduct part or all of its charitable activities in a foreign_country the ruling holds that if the organization's activities are charitable when carried on within the united_states the conduct of such activities elsewhere should not preclude qualification for exemption revrul_74_587 1974_2_cb_162 holds that an organization formed to relieve poverty eliminate prejudice reduce neighborhood tensions and combat community deterioration through a program of financial assistance in the form of low-cost or long- term loans to or the purchase of equity interests in various business enterprises in economically depressed areas is exempt under sec_501 of the code financial assistance was provided to corporations or individual proprietors who were not able to obtain funds from conventional commercial sources because of the poor financial risks involved also the program was designed to enable the recipient of the funds to start a new business or to acquire or improve an existing business the loans were not undertaken for the purpose of profit or gain but for the purpose of achieving the charitable goals of the organization revrul_81_284 1981_2_cb_130 amplifying revrul_74_587 held that a small_business_investment_company sbic licensed under sec_301 of the small_business investment act of may qualify under sec_501 of the code even though smail business administration regulations require an sbic to charge interest rates sufficient in the aggregate to recover its costs and impose various considerations that will restrict the degree of financial support that may be offered to a prospective recipient regarding the borrower's type of business security interests and the relationship between the sbic and the borrower the organization at issue was ruled exempt under sec_501 where it was organized on a nonprofit basis to relieve poverty eliminate prejudice and discrimination reduce neighborhood tensions and combat community deterioration by providing low-cost or long-term loans to businesses not able to obtain funds from conventional commercial sources with preference given to businesses providing training and employment opportunities for the unemployed or under-employed residents of economically depressed areas sec_509 of the code defines the term private_foundation as an organization described in sec_501 other than an organization described in sec_170 other than in clauses vii and viii sec_170 of the code describes an organization which normally receives a substantial part of its support exclusive of income received in the exercise or performance by such organization of its charitable educational or other exempt_function from a governmental_unit or from direct or indirect_contributions from the general_public sec_1_170a-9 of the regulations provides th t for the purposes of meeting the support_test there shall be excluded from both the numerator and the denominator any amounts received from the exercise or performance by an organization of its charitable educational or other purpose or function constituting the basis for its exemption under sec_501 sec_1_170a-9 further provides that in general amounts received by an organization from the exercise or performance of its exempt_purpose or function include amounts received from any activity the conduct of which is substantially related to the furtherance of such purpose or function other than through the production_of_income sec_511 of the code imposes a tax on the unrelated_business_taxable_income of exempt_organizations sec_512 of the code defines unrelated_business_taxable_income as gross_income derived from any unrelated_trade_or_business regularly carried on by it less certain deductions and modifications sec_512 b of the code excludes from unrelated_business_taxable_income dividends interest and certain gains and losses from the disposition of property except in the case of certain debt-financed_property sec_513 of the code defines unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_function or purpose sec_1_513-1 of the regulations provides that for the conduct of trade_or_business to be substantially related to an organization's exempt purposes the production or distribution of the goods or the performance of the services must contribute importantly to the accomplishment of those purposes analysis your investments in the banks are different from a typical capital venture the banks are involved in financing microloans and providing savings services to the poor and underserved a majority of the banks’ investors and boards of directors will include representatives of international organizations or your representatives committed to serving the economic development needs of the underprivileged and poor of impoverished countries in this manner you will have the control and discretion necessary to ensure that your investment will be used for your charitable purposes of relieving poverty in impoverished countries you are not investing in the banks as a means of making a profit as any profit made will be put back into the banks and will be a nominal amount under the facts presented your investment program will further the charitable purpose of providing relief to the poor and distressed or underprivileged the investment program will relieve conditions of poverty in impoverished countries the facts are similar to rev ruls and in addition any income generated by the investment program is income earned from the exercise or performance of your exempt functions because the investment program is performed in furtherance of your charitable purposes pursuant to sec_1_170a-9 of the regulations that income is not included in either the numerator or the denominator for purposes of computing public support under sec_170 of the code consistent with our finding that your investment program will further your charitable purposes we conclude that the investment program contributes importantly to the accomplishment of your charitable purposes and as such is substantially related to the accomplishment of your exempt purposes therefore it will not constitute unrelated_trade_or_business even if the business activity were unrelated however the income generated by the activity might still qualify for the passive_income exceptions to unrelated taxable_income set forth in sec_512 of the code conclusion accordingly based on the facts and discussion above we rule as follows the activities of investing in foreign financial institutions as described above will not jeopardize your tax-exempt status under sec_501 of the code income from the investments will be characterized as income from activities related to your tax-exempt purposes rather than investment_income for purposes of the support_test of sec_509 and sec_170 a vi of the code income from the investments will not subject you to the tax on unrelated_business_taxable_income under sections of the code this ruling is based on the understanding that there will be no material_change in the facts upon which it is based any changes that may have a bearing on your tax status should be reported to the service this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as precedent because this letter could help resolve future questions about your income_tax responsibility please keep a copy of this ruling in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter we have sent a copy of this letter to your authorized representative as indicated in your power_of_attorney a sincerely signed marvin friedlander marvin friedlander manager exempt_organizations technical group


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp 1-plr-124355-01 date date parent company company company company holding_company sub sub sub sub plr-124355-01 sub sub sub sub sub shareholder shareholder shareholder shareholder shareholder a b c d e f plr-124355-01 g h j k deed business l country u country v state x country y country z this letter is in reply to your letter dated date requesting rulings with respect to a plan_of_reorganization described below the proposed transaction additional information relating to the proposed transaction was submitted in letters dated july september september october november december and date and january february march and date the information submitted for consideration is summarized below parent is a publicly held country v corporation parent is engaged in business l through its subsidiaries company is a country u corporation parent owns a percent of company directly and indirectly company is a country y corporation company is a wholly owned subsidiary of company holding_company is a country y corporation holding_company is active through certain lower tier subsidiaries which are primarily engaged in business l holding_company is a wholly owned subsidiary of company holding_company has plr-124355-01 never been a controlled_foreign_corporation cfc within the meaning of sec_957 of the internal_revenue_code_of_1986 as amended the code sub is a country y holding_company sub is a wholly owned subsidiary of holding_company sub has never been a cfc within the meaning of sec_957 of the code sub is a country z holding_company prior to the proposed transaction sub will have been a cfc within the meaning of sec_957 of the code sub owns b percent of sub shareholder a state x corporation owns c percent of sub shareholder a state x corporation owns d percent of sub shareholder a country y corporation is a wholly owned subsidiary of shareholder and owns e percent of sub sub is a country z corporation prior to the proposed transaction sub will have been a cfc within the meaning of sec_957 of the code sub owns f percent of sub sub owns g percent of sub sub is actively_engaged_in_business l sub sub sub sub and sub are actively_engaged_in_business l and are wholly owned direct and indirect lower tier country z subsidiaries of sub sub is a country z holding_company prior to the proposed transaction sub will have been a cfc within the meaning of sec_957 of the code company owns h percent of sub shareholder a country y corporation is a lower tier subsidiary of parent and owns j percent of sub shareholder an unrelated country z limited_liability_company owns k percent of sub shareholder is a wholly owned subsidiary of company which is a country y corporation company is a cfc within the meaning of sec_957 of the code and is a wholly owned subsidiary of company a us corporation that is a lower tier subsidiary of parent the above corporations represent that in order to accomplish corporate business purposes they desire to streamline company 2’s corporate structure and eliminate several holding_companies to accomplish these goals they have submitted the following proposed plan_of_reorganization the proposed transaction a company will move its management and control to country z becoming a tax resident of country z in accordance with a treaty between country y and country z company will remain a country y corporation for country y domestic corporate law purposes b holding_company will move its management and control to country z becoming a tax resident of country z in accordance with plr-124355-01 c d a treaty between country y and country z holding_company will remain a country y corporation for country y domestic corporate law purposes sub will move its management and control to country z becoming a tax resident of country z in accordance with a treaty between country y and country z sub will remain a country y corporation for country y domestic corporate law purposes company will acquire all of the assets of holding_company sub sub sub and sub in accordance with country z corporate law by completing the following five sequential transactions in a single operation resulting from a single agreement the deed approved by company holding_company sub sub sub and sub i ii iii iv sub will merge into sub the sub shareholders will be entitled to shares of sub in accordance with a specified exchange ratio for each sub share held the allotment of sub shares to the sub shareholders will take place only in a virtual way upon the actual cancellation of the sub shares the sub shareholders will ultimately be allotted only company shares sub will merge into sub the sub shares outstanding will be cancelled sub will merge into sub the sub shareholders will be entitled to shares of sub in accordance with a specified exchange ratio for each sub share held the allotment of sub shares to the sub shareholders will take place only in a virtual way upon the actual cancellation of the sub shares the sub shareholders will ultimately be allotted only company shares sub will merge into holding_company the sub shareholders will be entitled to shares of holding_company in accordance with a specified exchange ratio for each holding_company share held the allotment of holding_company shares to the sub shareholders will take place only in a virtual way upon the actual cancellation of the sub shares the sub shareholders will ultimately be allotted only company shares v holding_company will merge into company the holding_company shareholders will be entitled to shares of company in accordance with a specified exchange ratio for each holding plr-124355-01 company share held company shares will be issued to the holding_company shareholders in accordance with their proportionate interests in the merged corporations the deed specifies that if any one of the above mergers fails to be implemented all of the mergers described in the deed will be canceled we hold that for federal_income_tax purposes the five transactions required to effect the proposed country z unitary merger described above will be treated as the following sequence of transactions sub will acquire all of the assets of sub in exchange for sub stock and the assumption of all of the liabilities of sub the shareholders of sub will be deemed to receive sub shares in exchange for their sub shares sub will acquire all of the assets of sub and the sub shares outstanding will be cancelled pursuant to a plan deemed to be adopted after the merger of sub into sub sub will acquire all of the assets of sub in exchange for sub stock and the assumption of all of the liabilities of sub the shareholders of sub will be deemed to receive sub shares in exchange for their sub shares holding_company will acquire all of the assets of sub in exchange for holding_company stock and the assumption of all of the liabilities of sub the shareholders of sub will be deemed to receive holding_company shares in exchange for their sub shares company will acquire all of the assets of holding_company in exchange for company stock and the assumption of all of the liabilities of holding_company the shareholders of holding_company will receive company shares in exchange for their holding_company shares the parties submitted the following representations with respect to step d i the sub merger ai the fair_market_value of the sub stock deemed received by each sub shareholder will be approximately equal to the fair_market_value of the sub stock deemed surrendered in the exchange plr-124355-01 bi ci di ei fi gi hi ii the sub shareholders company shareholder and shareholder will receive no consideration other than sub stock no sub shares will be exchanged for cash in lieu of fractional share interests and there will be no dissenters to the transaction neither sub nor persons related to sub within the meaning of sec_1_368-1 of the income_tax regulations the regulations acquired stock of sub in connection with the reorganization for consideration other than sub stock sub neither redeemed its stock nor made distributions to its shareholders in connection with the reorganization sub will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by sub immediately prior to sub merger for purposes of this representation amounts used by sub to pay its reorganization expenses all redemptions and any distributions except for regular normal dividends made by sub immediately preceding the transfer will be included as assets of sub held immediately prior to the sub merger after the sub merger the shareholders of sub shareholder company and shareholder will be in control of sub within the meaning of sec_368 and sec_304 of the code sub has no plan or intention to dispose_of any of the assets of sub acquired in the sub merger other than dispositions made in the normal course of its business operations and other than the dispositions described as part of this proposed transaction the fair_market_value of the assets of sub transferred to sub will equal or exceed the sum of the liabilities assumed by sub as determined under sec_357 of the code the total adjusted_basis of the assets of sub transferred to sub will equal or exceed the sum of the liabilities assumed by sub as determined under sec_357 of the code the liabilities of sub assumed by sub as determined under sec_357 of the code were incurred by sub in the ordinary course of its business and are associated with the assets transferred following the sub merger sub and its successors sub holding_company and company will continue the historic_business of sub and its subsidiary sub and use a significant portion of the historic_business_assets of sub and its subsidiary sub in a business plr-124355-01 ji ki li at the time of the sub merger neither sub nor sub will have outstanding any warrants options convertible securities or any other type or right pursuant to which any person could acquire stock in sub that if exercised or converted would affect the acquisition or retention of control of sub by company shareholder and shareholder as defined in sec_368 and sec_304 of the code sub sub and the shareholders of sub will pay their respective expenses if any incurred in connection with sub merger there is no intercorporate indebtedness existing between sub and sub that was issued acquired or will be settled at a discount mi no two parties to the sub merger are investment companies as defined in sec_368 and iv of the code ni neither sub nor sub is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 of the code the parties submitted the following representations with respect to step d ii the sub merger aii sub on the date of the adoption of the 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 outstanding_stock of sub for the purpose of this representation the plan_of_liquidation of sub is considered to be adopted after the sub merger bii no shares of the stock of sub will have been redeemed during the three years preceding the adoption of the plan of complete_liquidation of sub cii all distributions from sub to sub pursuant to the plan of complete_liquidation will be made within a single taxable_year of sub dii as soon as the first liquidating_distribution has been made sub 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 eii sub will retain no assets following the final liquidating_distribution fii sub 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 plan_of_liquidation plr-124355-01 gii no assets of sub have been or will be disposed of by either sub or sub except for dispositions in the ordinary course of business dispositions occurring more than three years prior to adoption of the plan_of_liquidation and except as otherwise described as part of this proposed transaction hii except as otherwise described as part of this proposed transaction the liquidation of sub 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 sub if persons holding directly or indirectly more than percent in value of the stock of sub also hold directly or indirectly more than percent in value of the stock of recipient for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 of the code iii no assets of sub will have been distributed in_kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to adoption of the liquidation plan jii sub 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 etc kii lii the fair_market_value of the assets of sub will exceed its liabilities both at the date of the adoption of the plan of complete_liquidation and immediately prior to the time the first liquidating distributing is made there is no intercorporate debt existing between sub and sub no intercorporate debt has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the date of adoption of the plan of complete_liquidation mii sub is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code nii all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the proposed liquidation of sub have been fully disclosed the parties submitted the following representations with respect to step d iii the sub merger plr-124355-01 aiii the fair_market_value of the sub stock deemed received by each sub shareholder will be approximately equal to the fair_market_value of the sub stock deemed surrendered in the exchange biii the sub shareholders company shareholder shareholder shareholder shareholder and shareholder will receive no consideration other than sub stock no sub shares will be exchanged for cash in lieu of fractional share interests and there will be no dissenters to the transaction neither sub nor persons related to sub within the meaning of sec_1_368-1 of the regulations acquired stock of sub in connection with the reorganization for consideration other than sub stock sub neither redeemed its stock nor made distributions to its shareholders in connection with the reorganization ciii sub will acquire at least percent of the fair_market_value of the net assets and least percent of the fair_market_value of the gross assets held by sub immediately prior to sub merger for purposes of this representation amounts used by sub to pay its reorganization expenses all redemptions and any distributions except for regular normal dividends made by sub immediately preceding the transfer will be included as assets of sub held immediately prior to the sub merger diii after the sub merger the shareholders of sub company shareholder shareholder shareholder shareholder and shareholder will be in control of sub within the meaning of sec_368 and sec_304 of the code eiii sub has no plan or intention to dispose_of any of the assets of sub acquired in the sub merger other than dispositions made in the normal course of its business operations and other than the dispositions made in the normal course of its business operations and other than the dispositions described as part of this proposed transaction fiii the fair_market_value of the assets of sub transferred to sub will equal or exceed the sum of the liabilities assumed by sub as determined under sec_357 of the code giii the total adjusted_basis of the assets of sub transferred to sub will equal or exceed the sum of the liabilities assumed by sub as determined under sec_357 of the code hiii the liabilities of sub assumed by sub as determined under sec_357 of the code were incurred by sub in the ordinary course of its business plr-124355-01 and are associated with the assets transferred iiii following the sub merger sub and its successors holding_company and company will continue the historic_business of sub and use a significant portion of the historic_business_assets of sub in a business jiii at the time of the sub merger neither sub nor sub will have outstanding any warrants options convertible securities or any other type or right pursuant to which any person could acquire stock sub that if exercised or converted would affect the acquisition or retention of control of sub by company shareholder shareholder shareholder shareholder and shareholder as defined in sec_368 and sec_304 of the code kiii sub sub and the shareholders of sub will pay their respective expenses if any incurred in connection with the sub merger liii there is no intercorporate indebtedness existing between sub and sub that was issued acquired or will be settled at a discount miii no two parties to the sub merger are investment companies as defined in sec_368 and iv of the code niii neither sub nor sub is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 of the code the parties submitted the following representations with respect to step d iv the sub merger aiv the fair_market_value of the holding_company stock deemed received by each sub shareholder will be approximately equal to the fair_market_value of the sub stock deemed surrendered in the exchange biv the sub shareholders company shareholder shareholder shareholder shareholder and shareholder will receive no consideration other than holding_company stock no sub shares will be exchanged for cash in lieu of fractional share interests and there will be no dissenters to the transaction neither holding_company nor persons related to holding_company within the meaning of sec_1_368-1 of the regulations acquired stock of sub in connection with the reorganization for consideration other than holding_company stock sub neither redeemed its stock nor made distributions to its shareholders in connection with the reorganization plr-124355-01 civ holding_company will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by sub immediately prior to sub merger for purposes of this representation amounts used by sub to pay its reorganization expenses all redemptions and any distributions except for regular normal dividends made by sub immediately preceding the transfer will be included as assets of sub held immediately prior to the sub merger div after the sub merger the shareholders of sub company shareholder shareholder shareholder shareholder and shareholder will be in control of holding_company within the meaning of sec_368 and sec_304 of the code eiv holding_company has no plan or intention to dispose_of any of the assets of sub acquired in the sub merger other than dispositions made in the normal course of its business operations and other than the dispositions described as part of this proposed transaction fiv the fair_market_value of the assets of sub transferred to holding_company will equal or exceed the sum of the liabilities assumed by holding_company as determined under sec_357 of the code giv the total adjusted_basis of the assets of sub transferred to holding_company will equal or exceed the sum of the liabilities assumed by holding_company as determined under sec_357 of the code hiv the liabilities of sub assumed by holding_company as determined under sec_357 of the code were incurred by sub in the ordinary course of its business and are associated with the assets transferred iiv following the sub merger holding_company and its successor company will continue the historic_business of sub and use a significant portion of the historic_business_assets of sub in a business jiv at the time of the sub merger neither sub nor holding_company will have outstanding any warrants options convertible securities or any other type or right pursuant to which any person could acquire stock in holding_company that if exercised or converted would affect the acquisition or retention of control of holding_company by company shareholder shareholder shareholder shareholder and shareholder as defined in sec_368 and sec_304 of the code kiv holding_company sub and the shareholders of sub will pay their plr-124355-01 respective expenses if any incurred in connection with the sub merger liv there is no intercorporate indebtedness existing between sub and holding_company that was issued acquired or will be settled at a discount miv no two parties to the sub merger are investment companies as defined in sec_368 and iv of the code niv neither sub nor holding_company is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 of the code the parties submitted the following representations with respect to step d v the holding_company merger av the fair_market_value of the company stock received by each holding_company shareholder will be approximately equal to the fair_market_value of the holding_company stock surrendered in the exchange bv the holding_company shareholders company shareholder shareholder shareholder shareholder and shareholder will receive no consideration other than company stock no holding_company shares will be exchanged for cash in lieu of fractional share interests and there will be no dissenters to the transaction neither company nor persons related to company within the meaning of sec_1_368-1 of the regulations acquired stock of holding_company in connection with the reorganization for consideration other than company stock holding_company neither redeemed its stock nor made distributions to its shareholders in connection with the reorganization cv company will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by holding_company immediately prior to holding_company merger for purposes of this representation amounts used by holding_company to pay its reorganization expenses all redemptions and any distributions except for regular normal dividends made by holding_company immediately preceding the transfer will be in included as assets of holding_company held immediately prior to the holding_company merger dv after the holding_company merger the shareholders of holding_company company shareholder shareholder shareholder shareholder and shareholder will be in control of company within plr-124355-01 the meaning of sec_368 and sec_304 of the code ev company has no plan or intention to dispose_of any of the assets of holding_company acquired in the holding_company merger other than dispositions made in the normal course of its business operations fv the fair_market_value of the assets of holding_company transferred to company will equal or exceed the sum of the liabilities assumed by company as determined under sec_357 of the code gv the total adjusted_basis of the assets of holding_company transferred to company will equal or exceed the sum of the liabilities assumed by company as determined under sec_357 of the code hv the liabilities of holding_company assumed by company as determined under sec_357 of the code were incurred by holding_company in the ordinary course of its business and are associated with the assets of holding_company in a business iv jv following the holding_company merger company will continue the historic_business of holding_company and use a significant portion of the historic_business_assets of holding_company in a business at the time of the holding_company merger neither holding_company nor company will have outstanding any warrants options convertible securities or any other type or right pursuant to which any person could acquire stock in company that if exercised or converted would affect the acquisition or retention of control of company by company shareholder shareholder shareholder shareholder and shareholder as defined in sec_368 and sec_304 of the code kv company holding_company and the shareholders of holding_company will pay their respective expenses if any incurred in connection with the holding_company merger lv there is no intercorporate indebtedness existing between holding_company and company that was issued acquired or will be settled at a discount mv no two parties to the holding_company merger are investment companies as defined in sec_368 and iv of the code nv neither holding_company nor company is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 of plr-124355-01 the code based solely on the information submitted and on the representations set forth above we hold as follows with respect to the sub merger the acquisition by sub of substantially_all of the assets of sub solely in exchange for sub voting_stock and sub 2’s assumption of sub 4’s liabilities if any followed by sub 4’s distribution of sub stock will constitute a reorganization within the meaning of sec_368 of the code for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of sub sub and sub will each be a_party_to_a_reorganization within the meaning of sec_368 of the code no gain_or_loss will be recognized to sub on the transfer of substantially_all of its assets to sub subject_to liabilities in exchange for sub voting_stock sec_361 and sec_357 of the code no gain_or_loss will be recognized to sub upon the receipt of substantially_all of the assets of sub in exchange for sub voting_stock sec_1032 of the code no gain_or_loss will be recognized to the sub shareholders by reason of the exchange of their shares of sub stock solely for shares of sub voting_stock sec_354 of the code no gain_or_loss will be recognized to sub upon the distribution of sub voting_stock to the sub shareholders sec_361 of the code the basis of the sub assets in the hands of sub will be the same as the basis of those assets in the hands of sub immediately prior to the transfer sec_362 of the code the holding_period of the sub assets in the hands of sub will include the period during which such assets were held by sub sec_1223 of the code the basis of the shares of sub voting_stock received by the sub shareholders will be the same in each instance as their basis in the sub stock surrendered in exchange therefor sec_358 of the code plr-124355-01 the holding_period of the sub voting_stock received by the sub shareholders will include the holding_period of the sub stock surrendered in exchange therefor provided that such sub stock is held as a capital_asset on the date of the exchange sec_1223 of the code the taxable_year of sub will end on the date of the transfer of its assets to sub sec_381 of the code and sec_1_381_b_-1 of the regulations pursuant to sec_381 and sec_381 a -1 of the code sub will succeed to and take into account as of the date of the proposed transfer as defined in sec_1_381_b_-1 of the regulations the items of sub described in sec_381 of the code subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 of the code and the regulations thereunder as provided by sec_381 of the code and sec_1_381_c_2_-1 of the regulations sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of transfer any deficit in the earnings or profits of either sub or sub will be used only to offset the earnings_and_profits accumulated after the date of transfer sec_381 of the code based solely on the information submitted and on the representations set forth above we hold as follows with respect to the sub merger the acquisition by sub of all of the assets of sub will be treated as a complete_liquidation of sub under sec_332 of the code no gain_or_loss will be recognized to sub on the distribution of its assets to sub sec_336 sec_337 and sec_337 of the code no gain_or_loss will be recognized to sub upon the receipt of the assets of sub sec_332 of the code the basis of the sub assets in the hands of sub will be the same as the basis of those assets in the hands of sub immediately prior to the transfer sec_334 of the code the holding_period of the sub assets in the hands of sub will include the period during which such assets were held by sub sec_1223 of the code plr-124355-01 the tax_year of sub will end on the date of the transfer of its assets to sub sec_381 of the code and sec_1_381_b_-1 of the regulations pursuant to sec_381 and sec_381 a -1 of the code sub will succeed to and take into account as of the date of the proposed transfer as defined in sec_1_381_b_-1 of the regulations the items of sub described in sec_381 of the code subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 of the code and the regulations thereunder as provided by sec_381 of the code and sec_1_381_c_2_-1 of the regulations sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of transfer any deficit in the earnings or profits of either sub or sub will be used only to offset the earnings_and_profits accumulated after the date of transfer sec_381of the code based solely on the information submitted and on the representations set forth above we hold as follows with respect to the sub merger the acquisition by sub of substantially_all of the assets of sub solely in exchange for sub voting_stock and sub 1's assumption of sub 2's liabilities if any followed by sub 2's distribution of sub stock will constitute a reorganization within the meaning of sec_368 of the code for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of sub sub and sub will each be a_party_to_a_reorganization within the meaning of sec_368 of the code no gain_or_loss will be recognized to sub on the transfer of substantially_all of its assets to sub subject_to liabilities in exchange for sub voting_stock sec_361 and sec_357 of the code no gain_or_loss will be recognized to sub upon the receipt of substantially_all of the assets of sub in exchange for sub voting_stock sec_1032 of the code no gain_or_loss will be recognized to the sub shareholders by reason of the exchange of their shares of sub stock solely for shares of sub voting_stock sec_354 of the code no gain_or_loss will be recognized to sub upon the distribution of plr-124355-01 sub voting_stock to the sub shareholders sec_361 of the code the basis of the sub assets in the hands of sub will be the same as the basis of those assets in the hands of sub immediately prior to the transfer sec_362 of the code the holding_period of the sub assets in the hands of sub will include the period during which such assets were held by sub sec_1223 of the code the basis of the shares of sub voting_stock received by the sub shareholders will be the same in each instance as their basis in the sub stock surrendered in exchange therefor sec_358 of the code the holding_period of the sub voting_stock received by the sub shareholders will include the holding_period of the sub stock surrendered in exchange therefor provided that such sub stock is held as a capital_asset on the date of the exchange sec_1223 of the code the taxable_year of sub will end on the date of the transfer of its assets to sub sec_381 of the code and sec_1_381_b_-1 of the regulations pursuant to sec_381 and sec_381 a -1 of the code sub will succeed to and take into account as of the date of the proposed transfer as defined in sec_1_381_b_-1 of the regulations the items of sub described in sec_381 of the code subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 of the code and the regulations thereunder as provided by sec_381 of the code and sec_1_381_c_2_-1 of the regulations sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of transfer any deficit in the earnings or profits of either sub or sub will be used only to offset the earnings_and_profits accumulated after the date of transfer sec_381 of the code based solely on the information submitted and on the representations set forth above we hold as follows with respect to the sub merger the acquisition by holding_company of substantially_all of the assets of sub solely in exchange for holding_company voting plr-124355-01 stock and holding company’s assumption of sub 1’s liabilities if any followed by sub 1’s distribution of holding_company stock will constitute a reorganization within the meaning of sec_368 of the code for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of sub holding_company and sub will each be a_party_to_a_reorganization within the meaning of sec_368 of the code no gain_or_loss will be recognized to sub on the transfer of substantially_all of its assets to holding_company subject_to liabilities in exchange for holding_company voting_stock sec_361 and sec_357 of the code no gain_or_loss will be recognized to holding_company upon the receipt of substantially_all of the assets of sub in exchange for holding_company voting_stock sec_1032 of the code no gain_or_loss will be recognized to the sub shareholders by reason of the exchange of their shares of sub stock solely for shares of holding_company voting_stock sec_354 of the code no gain_or_loss will be recognized to sub upon the distribution of holding_company voting_stock to the sub shareholders sec_361 of the code the basis of the sub assets in the hands of holding_company will be the same as the basis of those assets in the hands of sub immediately prior to the transfer sec_362 of the code the holding_period of the sub assets in the hands of holding_company will include the period during which such assets were held by sub sec_1223 of the code the basis of the shares of holding_company voting_stock received by the sub shareholders will be the same in each instance as their basis in the sub stock surrendered in exchange therefor sec_358 of the code the holding_period of the holding_company voting_stock received by the sub shareholders will include the holding_period of the sub stock surrendered in exchange therefor provided that such sub stock is held as a capital_asset on the date of the exchange sec_1223 of the code plr-124355-01 the taxable_year of sub will end on the date of the transfer of its assets to holding_company sec_381 of the code and sec_1 b - a of the regulations pursuant to sec_381 and sec_381 a -1 of the code holding_company will succeed to and take into account as of the code of the date of the proposed transfer as defined in sec_1_381_b_-1 of the regulations the items of sub described in sec_381 of the code subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 of the code and the regulations thereunder as provided by sec_381 of the code and sec_1_381_c_2_-1 of the regulations holding_company will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of transfer any deficit in the earnings or profits of either sub or holding_company will be used only to offset the earnings_and_profits accumulated after the date of transfer sec_381 of the code based solely on the information submitted and on the representations set forth above we hold as follows with respect to the holding_company merger the acquisition by company of substantially_all of the assets of holding_company solely in exchange for company voting_stock and company 2's assumption of holding company's liabilities if any followed by holding company's distribution of company stock will constitute a reorganization within the meaning of sec_368 of the code for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of holding_company company and holding_company will each be a_party_to_a_reorganization within the meaning of sec_368 of the code no gain_or_loss will be recognized to holding_company on the transfer of substantially_all of its assets to company subject_to liabilities in exchange for company voting_stock sec_361 and sec_357 of the code no gain_or_loss will be recognized to company upon the receipt of substantially_all of the assets of holding_company in exchange for company voting_stock sec_1032 of the code no gain_or_loss will be recognized to the holding_company shareholders by reason of the exchange of their shares of holding plr-124355-01 company stock solely for shares of company voting_stock sec_354 of the code no gain_or_loss will be recognized to holding_company upon the distribution of company voting_stock to the holding_company shareholders sec_361 of the code the basis of the holding_company assets in the hands of company will be the same as the basis of those assets in the hands of holding_company immediately prior to the transfer sec_362 of the code the holding_period of the holding_company assets in the hands of company will include the period during which such assets were held by holding_company sec_1223 of the code the basis of the shares of company voting_stock received by the holding_company shareholders will be the same in each instance as their basis in the holding_company stock surrendered in exchange therefor sec_358 of the code the holding_period of the company voting_stock received by the holding_company shareholders will include the holding_period of the holding_company stock surrendered in exchange therefor provided that such holding_company stock is held as a capital_asset on the date of the exchange sec_1223 of the code the taxable_year of holding_company will end on the date of the transfer of its assets to company sec_381 of the code and sec_1_381_b_-1 of the regulations pursuant to sec_381 and sec_381 a -1 of the code company will succeed to and take into account as of the date of the proposed transfer as defined in sec_1_381_b_-1 of the regulations the items of holding_company described in sec_381 of the code subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 of the code and the regulations thereunder as provided by sec_381 of the code and sec_1_381_c_2_-1 of the regulations company will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of holding_company as of the date of transfer any deficit in the earnings or profits of either holding_company or company will be used only to offset the earnings_and_profits accumulated after the date of transfer sec_381 of the code plr-124355-01 we express no opinion about the tax treatment of the transaction under other provisions of the code or the regulations or about the 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 specifically no opinion is expressed regarding whether any or all of the above-referenced foreign_corporations are passive foreign investment companies within the meaning of sec_1297 of the code if it is determined that any or all of the above-described foreign_corporations are passive foreign investment companies no opinion is expressed with respect to the application of sec_1291 through of the code to the proposed transaction in particular in a transaction in which gain is not otherwise recognized regulations under sec_1291 of the code may require gain recognition notwithstanding any other provision of the code additionally no opinion is expressed regarding the application of sec_367 of the code to the successive reorganizations or the application of sec_367 of the code to the sec_332 liquidation see sec_1_367_b_-4 and d and sec_1_367_e_-2 of the regulations the rulings contained in this letter are based upon 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 a ruling as part of the audit process the taxpayer may be required to verify the information representations and other data submitted this ruling letter has no effect on any earlier documents and is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent each affected taxpayer must attach a copy of this letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction covered by this letter_ruling is consummated in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer cc sincerely yours associate chief_counsel corporate by lisa a fuller assistant to the chief branch


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date cc ita b04---------------------- conex-152022-09 number info release date uil ----------------------- ---------------------------- ------------------------------------ dear ----- --------- this letter responds to your letter to the president of the united_states dated date you asked why you must repay the first-time_homebuyer credit for the purchase of your home in date but taxpayers who purchase their homes after do not have to repay the credit the law provides taxpayers with a credit for home purchases during different timeframes the rules for the credit differ between the different timeframes the first timeframe was between date and date and the law requires taxpayers to repay the credit over a year period for home purchases during that timeframe see section of the economic and housing recovery act of pub_l_no 122_stat_2654 pincite and sec_36 of the internal_revenue_code code congress amended sec_36 of the code to provide different rules for purchases between date and date see section of the american reinvestment and recovery tax act of pub_l_no 123_stat_115 pincite sec_11 of the worker homeownership and business assistance act of pub_l_no 123_stat_2984 pincite and sec_36 the amended law does not require a taxpayer to repay the credit if the taxpayer does not sell or move out of the residence within three years after the date of purchase of the residence the amendments did not eliminate the requirement to repay the credit for homes purchased in you indicated that you purchased your home during the first timeframe between date and date consequently you must repay the first-time_homebuyer credit unfortunately the law does not grant the internal_revenue_service administrative authority to disregard the repayment requirement for purchases during the first timeframe conex-152022-09 i hope this information is helpful if you have any questions regarding this matter please contact -----------------------------at --------------------- sincerely michael j montemurro chief branch office of associate chief_counsel income_tax and accounting


department of the treasury internal_revenue_service washington d c cc ebeo br 2rswilson cor-101648-00 uilc date number info release date dear this is in reference to your letter dated date as to whether the center may withdraw from the social_security system by enrolling its employees in the system pers you ask for information on whether the of compensation that has been paid to social_security may be contributed instead to the pers public employees’ retirement it appears that your letter refers to the special rules for the application of the social_security_tax to employees of a state government social_security_tax is imposed under the federal_insurance_contributions_act fica located at of the internal_revenue_code code under sec_3121 of the code services of state employees are generally not subject_to social_security_tax if the employees are covered under a state retirement_plan that provides a minimum level of benefits the exemption from social_security_tax under sec_3121 is not optional if the requirements for the exemption are met social_security_tax cannot be paid with respect to the employees unless the employees are provided social_security coverage under the state’s sec_218 agreement as discussed in footnote state employees who are covered under a retirement_plan would however be subject_to social_security_tax if they are also covered by an agreement sec_218 agreement between the state and the social_security administration to provide social_security coverage under sec_218 of the social_security act in addition under sec_3121 of the code state employees hired after date are generally subject_to the medicare portion of the fica tax even if they are covered under a state retirement_plan cor-101648-00 it is important to note however that sec_3121 applies only to service performed in the employ of a state or any political_subdivision thereof or any instrumentality of any one or more of the foregoing which is wholly owned thereby thus in order for sec_3121 to apply it must be established that the employer is either part of the state government for example an agency_or_instrumentality of the state or part of the government of a political_subdivision of the state the following six factors are considered in determining whether an organization is an instrumentality of one or more states or political subdivisions whether the organization is used for a governmental purpose and performs a governmental function whether performance of its function is on behalf of one or more states or political subdivisions whether there are any private interests involved or whether the states or political subdivisions involved have the powers and interests of an owner whether control and supervision of the organization are vested in public authority or authorities whether express or implied statutory or other authority is necessary for the creation and or use of such an instrumentality and whether such authority exists and the degree of financial autonomy and the source of its operating_expenses see revrul_57_128 1957_1_cb_311 the question of whether a particular entity is an instrumentality of a state or a political_subdivision depends on the facts and circumstances of the particular case however a private non-profit organization would not ordinarily be an instrumentality of the state even if it receives funding from the state in addition the fact that employees of the organization are eligible to participate in the state’s retirement_plan is not determinative of whether the agency is an instrumentality of the state for purposes of sec_3121 cor-101648-00 we hope this information is helpful to you please note that this letter provides general information only and does not constitute a formal irs ruling on which a taxpayer may rely if you wish to obtain a formal ruling information about the ruling process is contained in revproc_2000_1 2000_1_irb_4 copy enclosed in case of questions please contact rebecca wilson badge no at sincerely patricia m mcdermott senior technician reviewer branch office of associate chief_counsel employee_benefits exempt_organizations enclosure


internal_revenue_service number release date index number ------------------------------------ ------------------ ------------------------------------------------------- ------------------------------------------ -------------------------------------------------- department of the treasury washington dc person to contact ------------------- id no ------------------ telephone number ---------------------- refer reply to cc fip b03 - plr-140525-12 date date legend company subsidiary accounting firm law firm state x state y date date date date ------------------------------------------ ------------------------------------------------- ---------------------------- ---------------------- -------------- -------------- ---------------------- ------------------- --------------------------- --------------------------- dear -------------------- this responds to a letter dated date submitted on behalf of company and subsidiary requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations to make an election under sec_856 of the plr-140525-12 internal_revenue_code code to treat subsidiary as a taxable_reit_subsidiary trs of company effective as of date facts company was organized as a state x corporation on date company elected to be taxed as a real_estate_investment_trust reit on its timely filed federal_income_tax return for its taxable_year ended date company was formed to invest primarily in loans secured_by mortgages on commercial and multifamily properties company formed subsidiary as a state y corporation on date subsidiary acquires holds and sells interests in commercial and multifamily real_estate company retained accounting firm to prepare federal_income_tax returns for both company and subsidiary for the taxable_year ended date a tax manager at accounting firm charged with preparing the tax returns asked to see a copy of the form_8875 company and subsidiary are required to file form_8875 to make an election under sec_856 to treat subsidiary as a trs of company company searched company’s files and failed to find a copy of the form_8875 company then contacted law firm which had been retained by company to prepare all the documents to form subsidiary as a trs no record was found that law firm prepared the form_8875 company represents that it intended that subsidiary qualify as a trs from the date of subsidiary’s formation subsidiary’s name includes the acronym trs in addition paragraph of the action by unanimous written consent in lieu of an organizational meeting by the board_of directors a document that is dated date states resolved further that the corporation shall be authorized to elect to qualify as a taxable_reit_subsidiary under the internal_revenue_code company and subsidiary have submitted in support of the requested extension the affidavit of the person initially responsible for preparing the form_8875 company and subsidiary make the following additional representations the request for relief was filed by company and subsidiary before the failure to make the regulatory election was discovered by the internal_revenue_service granting the relief will not result in company or subsidiary having a lower tax_liability in the aggregate for all years to which the regulatory election applies than that company or subsidiary would have had if the election had been timely made taking into account the time_value_of_money company and subsidiary did not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of plr-140525-12 the code at the time company and subsidiary requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences company and subsidiary did not choose to not file the election law and analysis sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a trs to be eligible for treatment as a trs sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary in announcement 2001_1_cb_716 the internal_revenue_service service announced the availability of form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for tax years beginning after for eligible entities to elect treatment as a trs the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the tax_year however the effective date of the election depends upon when the form_8875 is filed the instructions further provide that the effective date on the form cannot be more than months and days prior to the date of filing the election or months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service sec_301_9100-1 of the regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i sets forth rules that the internal_revenue_service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies plr-140525-12 than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money conclusion based on the information submitted and representations made we conclude that company and subsidiary have satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to treat subsidiary as a trs of company effective as of date company and subsidiary are granted a period of time not to exceed calendar days from the date of this letter to file a form_8875 to treat subsidiary as a trs of company as of date this ruling is limited to the timeliness of the filing of the form_8875 this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether company otherwise qualifies as a reit or whether subsidiary otherwise qualifies as a trs under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of either company or subsidiary is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect 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 who requested it sec_6110 provides that it may not be used or cited as precedent plr-140525-12 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely k scott brown branch chief branch office of associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes