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 b05 plr-100079-08 date date legend parent a country a business a business b distributing b sub sub sub c ---------------------- ----- ------------- -------------------------- ---------------------- --------------------------------- --- ---------------------------- -------------------------------------- ------------------------------- ----- foreign sub ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- ------------------------------- foreign sub ------------------------------- plr-100079-08 --------------------------------------------------------------------------------------------------- d -------- distributing ------------------------------------------------------------------------------------------------------------------- --------------------------------------------- e f g h i j foreign sub -------- ----- ----- ----- ----- ----- ------------------------------------- foreign sub ------------------------------------------------------------------------------------- ----------------------------------- country b sub ------------- ----------------------------------- sub ------------------------------------------------------------------------------------------------------------------- --------------------------------------------- sub ----------------------------------------------------------------------------------------------------------------- --------------------------------------------- sub ----------------------------------------------------------------------------------------- ---------------------------------- sub ---------------------------------------------------------------------------------------- ------------------------------ k -------- foreign sub ---------------------------------------------------------------------------------------------------------------- -------------------------------------------- plr-100079-08 -------------------------------------------------------------------------------------- country c l m n foreign sub country d foreign_partnership country e --------------------- -------- ----- --- ----------------------------------- ----------------- ------------------------------- ----------- business b asset ------------------------------------------------------------------------------------------------------------------ --------------------------------------------- o p q r sub date date s u v w x --- -- --- -------- --------------------------- ------------------ ------------------------- --- ----- ----- ----- ----- plr-100079-08 y --- sub ----------------------------------------------------------------------------------------------------------------- --------------------------------------------- sub -------------------------------------------------------------------------------------------- ------------------------------- sub --------------------------------------------------------------------------------------------------------------- --------------------------------------------- ---------------- sub sub --------------------- -------------------------- --------------------------------------------- sub -------------------------------------------------------------------------------------------------------------------- sub ------------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------- -------------------------------------------- sub -------------------------------------------------------------------------------------------------------------- --------------------------------------------- sub sub sub ------------------------------------- ---------------------------------- --------------------------------- sub ------------------------------------------------------------------------------------- ---------------------------------- state a z ---------------- --- sub ------------------------------------------------------------------------------------------------ ------------------------------------- sub -------------------------- plr-100079-08 aa bb foreign_partnership country f ----- ------ ------------------------------------ ---------- sub ----------------------------------------------------------------------------------------------------------------- --------------------------------------------- sub ----------------------------------- sub ---------------------------------------------------------------------------------------------- ------------------------------- --------------------------------------------- sub -------------------------------------------------------------------------------------------------------------------- sub ---------------------- finco --------------------------------------------- -------------------------------------------------------------------------------------------------------------------- country g cc dd business c ee ff gg hh ii jj ------------- ----- ----- ------------- ----- ----- --- --- -- --- plr-100079-08 kk ll mm nn oo pp --- --- --- -------- -- -------- new holdco llc -------------------------------------------- ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- qq controlled year month month year rr sub date dear ----------- --------- -------------- ------- -------- ----- ------- ----- ------------------------------------ ------------------- this letter responds to your date request for rulings as to the federal_income_tax consequences of a proposed transaction the information submitted in that request and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an plr-100079-08 appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the proposed transaction described below i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code 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 the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts parent is a publicly traded country a corporation and the parent of a group of multinational affiliated corporations parent does not directly conduct any trade_or_business_within_the_united_states and does not file a u s federal_income_tax return indirectly parent conducts primarily business a and business b both within and outside the united_states parent owns a of the outstanding_stock consisting of two classes of common_stock regular and class a in distributing in addition parent owns more than b of the sole outstanding class of stock of sub the remaining shares in sub are owned by two members of the distributing group sub and sub parent also owns c of the sole outstanding class of stock of foreign sub and foreign sub both of which are country a entities classified as corporations for u s federal tax purposes distributing owns approximately d of the sole outstanding class of stock in distributing a member of the distributing group the remaining e is owned by foreign sub a country a corporation which is wholly owned by parent distributing and distributing are and controlled will be accrual_method taxpayers distributing also owns f of the sole outstanding class of stock of sub sub owns g of foreign sub a country b corporation that is disregarded for u s federal tax purposes and that is engaged directly or through its wholly owned foreign subsidiaries in business b outside the united_states distributing owns h of the sole outstanding class of stock of the following u s_corporations that are also members of the distributing group sub sub and sub sub owns i of the outstanding_stock of sub and sub both of which are members of the distributing group sub owns j of the outstanding_stock of sub a member of the distributing group sub also owns k of the stock of foreign sub a country c entity classified as a plr-100079-08 corporation for u s federal tax purposes foreign sub owns the remaining l foreign sub is directly engaged in business a in country c sub owns i m of the sole outstanding class of stock of foreign sub a country d corporation and ii a n participant’s share in foreign_partnership a country e partnership that has an interest in a business b asset the remaining interest in foreign_partnership is owned o by foreign sub and q by sub in addition to its q interest in foreign_partnership sub owns r of the outstanding_stock of sub a member of the distributing group the remaining stock in sub is owned by distributing sub and sub from date to date in addition to sub common_stock there were also outstanding two classes of sub preferred_stock the aggregate voting power of all the outstanding preferred_stock was s of the total voting power and the aggregate value of all the outstanding preferred_stock was greater than y of the total value of all of the sub stock outstanding thus during the period from date to date sub and its direct and indirect subsidiaries were not members of the distributing group during that period sub was the common parent of its own u s consolidated_group in a series of redemptions ending on date sub redeemed all of its outstanding preferred_stock and thus sub and its direct and indirect subsidiaries became members of the distributing group these redemptions were not undertaken in contemplation of the subsidiary liquidations described below sub owns u of the outstanding_stock of sub sub owns stock in numerous u s and foreign_corporations including v of the outstanding_stock of the following members of the distributing group i sub ii sub iii sub iv sub and v sub sub owns w of the outstanding_stock of sub sub owns a royalty interest in a business a asset subs as well as sub are directly engaged in business a-all but sub in the u s -with sub and sub serving as the primary distributing group members so engaged sub is engaged in business b sub also owns x of the outstanding_stock of the following members of the distributing group sub sub sub sub and sub these companies are collectively known as the state a business b companies between month and month of year parent’s management initiated a review of the strategic fit of the state a business b companies within the overall parent worldwide group as a result of the review management decided to proceed with planning for a major expansion of such business distributing also owns z of the outstanding_stock of sub a member of the distributing group the remaining y of sub stock is owned by foreign sub sub owns aa of the outstanding_stock of sub a member of the distributing group sub 24’s principal asset is a bb participant’s share in foreign_partnership a plr-100079-08 country f entity that is taxed as a partnership for u s federal_income_tax purposes sub will have owned its share in foreign_partnership continuously throughout the 5-year period ending on the date of the transaction the three other participants in foreign_partnership who are unrelated to parent and to each other as of the date of this letter own the remaining participant’s shares in foreign_partnership sub owns cc of the outstanding_stock of sub a member of the sub group sub also owns dd of the stock of sub which conducts business c for business a and business b sub 25’s holdings include ee of the outstanding shares of stock of sub and sub both of which are members of the sub group sub is directly engaged in business a sub also owns ff of the stock of sub a member of the sub group sub is directly engaged in business b proposed transaction parent desires to restructure business a and business b so that each legal entity owning operating or supervising the operation of business a is placed under a single holding_company this reorganization of the legal ownership structure will then match the way in which business a is managed and operated reducing both administrative and risk-management costs including shielding one business from potential liabilities of the other associated with the commingled structure in addition although no specific transaction is currently planned the management of parent believes that separation of the businesses i provides clarity to investors as to the performance of each business permitting a separate listing of business a if market conditions or other business considerations dictate and ii permits use of holding_company equity as acquisition currency and financing flexibility for expansion in the particular business the management of parent believes that this flexibility provides a meaningful benefit to both businesses and that the separation will improve governance and oversight for accounting legal and other requirements the sub group intends to transfer the assets and liabilities of sub out of the sub group provided that such transfer is neither impractical nor unduly expensive such transfer and acquisition may occur via a transfer of all the sub group’s ownership_interest in an entity holding the assets and responsible for the satisfaction of liabilities of sub and may occur following the completion of the transaction described below in addition the acquirer and transferee of an entity holding the sub assets and responsible for the satisfaction of the sub liabilities may be a related_party the management of sub and distributing believe that any decision to not transfer the assets and liabilities of sub in the transaction described below does not affect the corporate business purposes for the transaction described below the tax consequences associated with the potential transfer of the assets and liabilities of sub will be the subject of a separate ruling_request submitted subsequent to the issuance of this letter_ruling plr-100079-08 to achieve the business objectives described above distributing and sub propose the following steps the transaction sub will adopt a plan of complete_liquidation and merger and merge with and into distributing with distributing surviving after which distributing will hold rr of the stock of sub and sub stock in sub and approximately gg of the stock of sub the sub liquidation sub will adopt a plan of complete_liquidation and convert to a single-member llc sub llc that will be disregarded from distributing for federal tax purposes after which for federal tax purposes distributing will hold approximately hh of the stock of sub the sub liquidation sub llc will distribute the sub stock to distributing sub will adopt a plan of complete_liquidation and merger redeem for cash distributing 2’s approximately ii interest and sub 5’s approximately ii interest in its stock and then merge with and into distributing with distributing surviving the sub liquidation sub will adopt a plan of complete_liquidation and merger and merge with and into distributing with distributing surviving the sub liquidation steps are referred to as the subsidiary liquidations and each subsidiary that will liquidate whether by merger or conversion is referred to as a liquidating subsidiary sub will transfer to distributing its shares of sub stock in exchange for one share of distributing voting preferred_stock the sub exchange such preferred_stock will accrue dividends at a fixed rate will not be redeemable in the sole discretion of the issuer or holder at any time during the 20-year period beginning on its issue_date and will not be puttable to or callable by any person related to distributing distributing will form a new u s_corporation controlled with a two-tiered capital structure including class a and class b shares foreign sub will elect to be treated as a disregarded_entity for u s federal tax purposes controlled will form a new u s_corporation transitory newco and controlled transitory newco distributing parent and sub will adopt a plan of contribution and merger the sub reorganization agreement transitory newco will merge with and into sub with sub surviving with parent exchanging its shares of sub common_stock representing more than b of the total voting power of sub stock for class b shares of controlled plr-100079-08 common_stock that will possess gg of the total combined voting power and approximately jj of the value of all controlled stock the reverse_merger steps and will occur pursuant to the sub reorganization agreement and are referred to as the sub reorganization distributing will contribute to controlled the controlled contribution in exchange solely for class a shares of controlled common_stock a all the outstanding shares of sub b all of the outstanding_stock of sub and subs c the kk shares of sub acquired from sub in step and sub in step the controlled class a common_stock will possess ll of the total combined voting power and approximately mm of the value of all controlled stock no liabilities will be assumed by controlled in the controlled contribution in step sec_12 and distributing will distribute with respect to its stock the controlled class a stock and cash as follows distributing will distribute to foreign sub a disregarded_entity of parent after step that holds e of the stock of distributing a nn of distributing 1’s controlled class a stock and b cash equal to oo of the value of the controlled class a stock distributing will distribute the remaining pp of the controlled class a stock which possesses qq greater than of the total combined voting power of all controlled stock to distributing step sec_12 and together are referred as distribution parent will contribute all the controlled class b stock to foreign sub in exchange for newly issued shares of foreign sub common_stock the first contribution foreign sub will form a new fiscally transparent u s entity new holdco llc that will be classified as a partnership under country a law and that will be disregarded for u s federal tax purposes and will contribute to new holdco llc all the controlled class b stock in exchange for all the interests in new holdco llc plr-100079-08 distributing will distribute all its controlled class a stock which it acquired from distributing and which possesses qq of the total combined voting power of all controlled stock to parent distribution foreign sub will distribute for purposes of local law its controlled class a stock to parent parent will contribute all the controlled class a stock to foreign sub in exchange for newly issued shares of common_stock the second contribution together with the first contribution the foreign sub contribution subsidiary liquidations representation sec_1 distributing on the date of the adoption of the plan of complete_liquidation by each liquidating subsidiary through the effective time of the merger or other transaction terminating the existence of the subsidiary and at all times until the merger or other transaction is completed will be the owner of at least of the single outstanding class of stock of each liquidating subsidiary the only property to be distributed to the minority shareholders of sub sub and distributing pursuant to the sub liquidation will be cash the fair_market_value of the consideration received by distributing and by the minority shareholders of sub sub and distributing for each share of sub stock will approximately equal the fair_market_value of that stock except for the redemption of all sub 10’s preferred_stock on date no shares of any liquidating subsidiary stock will have been redeemed during the three years preceding the adoption of the plan of complete_liquidation through merger or otherwise all distributions made by each liquidating subsidiary to a higher-tier member of the distributing group pursuant to the plan of complete_liquidation of the subsidiary will be made within a single taxable_year of the subsidiary the complete_liquidation of each liquidating subsidiary other than sub which will convert to a single member llc that is a disregarded_entity will satisfy all of the requirements of and qualify as a merger pursuant to applicable corporate law and by operation of such law will result in the acquiring_corporation acquiring all of the assets and liabilities of the subsidiary and the subsidiary ceasing to exist following the conversion of sub into a single-member limited_liability_company sub will be disregarded as an entity separate from its owner for federal tax purposes under reg sec_301_7701-3 and the single-member limited_liability plr-100079-08 company will not elect or claim to be treated as a corporation for federal_income_tax purposes neither sub sub sub nor sub will for federal tax purposes retain any assets following its merger or conversion except for the year transaction in which sub acquired some stock of sub in a transaction intended to be a sec_351 transfer no liquidating subsidiary will have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the date of the adoption of the plan_of_liquidation except as described in step of the transaction relating to assets of sub and sub that will be transferred to controlled no assets of any liquidating subsidiary have been or will be disposed of by either the liquidating subsidiary or distributing except for dispositions in the ordinary course of business and dispositions occurring more than years prior to the adoption of the plan_of_liquidation except as described in step of the transaction relating to assets of sub and sub that will be transferred to controlled no subsidiary_liquidation will 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 the liquidating subsidiary if persons holding directly or indirectly more than in value of the liquidating subsidiary stock also hold directly or indirectly more than in value of the stock in recipient for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 of the code as modified by sec_304 prior to the adoption of the plan_of_liquidation of each liquidating subsidiary no assets of the liquidating subsidiary will have been distributed in_kind transferred or sold to distributing except for transactions occurring in the ordinary course of business and transactions occurring more than three years prior to adoption of the plan the fair_market_value of the assets of each liquidating subsidiary will exceed its liabilities both at the date of the adoption of its plan_of_liquidation and immediately prior to the time the first liquidating_distribution will be made distributing is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code except for debt owed by sub to sub that if not eliminated before the transaction would become debt owed by distributing to sub as a result of the sub liquidation into distributing there is no intercorporate debt existing between distributing and any liquidating subsidiary and none has been cancelled plr-100079-08 forgiven or discounted except for transactions that occurred more than years prior to the date of adoption of the liquidation plan at the time of each subsidiary_liquidation there will be no indebtedness between the liquidating subsidiary and any other member of the worldwide group except for indebtedness that is properly characterized as indebtedness for federal_income_tax purposes each liquidating subsidiary 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 all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the proposed liquidation of each liquidating subsidiary have been fully disclosed sub exchange no stock_or_securities will be issued for services rendered to or for the benefit of distributing in connection with the sub exchange and no stock_or_securities will be issued for any indebtedness of distributing that is not evidenced by a security or for interest on indebtedness of distributing which accrued on or after the beginning of the holding_period of sub for the debt the sub exchange is not the result of the solicitation by a promoter broker or investment house sub will not retain any rights in the property transferred to distributing distributing will not be a bank_holding_company within the meaning of sec_2 of the bank_holding_company act of distributing will neither assume nor take any assets subject_to any liabilities in connection with the sub exchange there is no indebtedness between distributing and sub and there will be no indebtedness created in favor of sub as a result of the transaction the transfers and exchanges will occur under a plan agreed upon before the transaction in which the rights of the parties are defined all exchanges will occur on approximately the same date neither sub nor distributing has a plan or intention to dispose_of any shares of distributing stock following the sub exchange plr-100079-08 there is no plan or intention on the part of distributing to redeem or otherwise reacquire any shares of distributing stock to be issued in the sub exchange taking into account any issuance of additional shares of distributing any issuance of stock for services the exercise of any distributing stock_rights warrants or subscriptions a public offering of distributing stock and the sale exchange transfer by gift or other_disposition of any of the stock of distributing to be received in the exchange distributing and sub will be in control of distributing within the meaning of sec_368 sub will receive stock of distributing approximately equal to the fair_market_value of the property it transfers to distributing distributing will remain in existence and dispose_of the sub stock received in the sub exchange by transferring it to controlled as described in step of the transaction distributing will not be an investment_company within the meaning of sec_351 and reg sec_1_351-1 each of sub and distributing will pay its own expenses if any incurred in connection with the transaction sub is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock_or_securities received in the exchange will not be used to satisfy the indebtedness of such debtor distributing will not be a personal_service_corporation within the meaning of sec_269a the sub stock transferred by sub to distributing in the sub exchange is not sec_306 stock within the meaning of sec_306 sub reorganization pursuant to the reverse_merger as a result of the operation of law the following will occur simultaneously i all of the assets and liabilities of transitory newco will become assets and liabilities of sub and ii transitory newco will cease its separate legal existence the fair_market_value of the controlled class b stock received by parent will be approximately equal to the fair_market_value of the sub stock surrendered in the exchange following the sub reorganization sub will hold at least of the fair_market_value of its net assets and at least of the fair_market_value of its gross assets plr-100079-08 and at least of the fair_market_value of transitory newco’s net assets and at least of the fair_market_value of transitory newco’s gross assets held immediately prior to the transaction for purposes of this representation amounts paid_by sub or transitory newco to dissenters amounts paid_by sub or transitory newco to shareholders who receive cash or other_property amounts used by sub or transitory newco to pay reorganization expenses amounts used by sub or transitory newco to pay liabilities or other obligations other than operating liabilities incurred in the ordinary course of business and all redemptions and distributions except for regular normal dividends made by sub will be included as assets of sub or transitory newco respectively immediately prior to the transaction prior to the sub reorganization controlled will be in control of transitory newco within the meaning of sec_368 sub has no plan or intention to issue additional shares of its stock that would result in controlled losing control of sub within the meaning of sec_368 at the time of the transaction sub will not have outstanding any warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in sub that if exercised or converted would affect controlled’s acquisition or retention of control of sub as defined in sec_368 except as described in steps and of the transaction there is no plan or intention for controlled or any person related as defined in sec_1_368-1 to controlled to acquire or redeem any of the controlled stock to be issued in the sub reorganization either directly or indirectly or through any transaction agreement or arrangement with any other person except for redemptions of sub stock held by sub and sub on date which will not have been funded by controlled during the 5-year period ending on the date of the sub reorganization i neither controlled nor any person related as defined in sec_1_368-1 to controlled will have acquired sub stock with consideration other than controlled stock ii neither sub nor any person related as defined in sec_1_368-1 to sub will have acquired or redeemed sub stock with consideration other than controlled or sub stock and iii no distributions will have been made with respect to sub stock other than ordinary normal regular dividend distributions made pursuant to sub 2’s historic dividend paying practice either directly or through any transaction agreement or arrangement with any other person controlled has no plan or intention to i cause sub to liquidate for federal_income_tax purposes or terminate its corporate existence for federal_income_tax purposes ii sell or otherwise dispose_of the stock of sub except for transfers allowed under sec_368 and the applicable regulations thereunder or iii cause sub plr-100079-08 to sell or otherwise dispose_of any of its assets or any of the assets acquired from transitory newco except for dispositions made in the ordinary course of business or transfers allowed under sec_368 and the applicable regulations thereunder transitory newco will have no liabilities assumed by sub within the meaning of sec_357 and will not transfer to sub any assets subject_to liabilities in the transaction following the sub reorganization i sub will continue to own all the outstanding_stock of sub which stock will constitute control of sub within the meaning of sec_368 ii sub will continue to own rr in voting power and value of the sole outstanding_stock of sub which stock will constitute control of sub within the meaning of sec_368 and iii sub taking into account the business of sub under sec_1_368-1 will continue its historic_business or use a significant portion of its historic_business_assets in a business within the meaning of reg sec_1_368-1 controlled transitory newco sub and parent will pay their respective expenses if any incurred in connection with the transaction there is no intercorporate indebtedness existing between controlled and sub or between transitory newco and sub that was or will be issued acquired or settled at a discount in the sub reorganization shares of sub stock representing control of sub as defined in sec_368 will be exchanged solely_for_voting_stock of controlled for purposes of this representation shares of sub stock exchanged for cash or other_property originating with controlled or any related_person as defined in reg sec_1_368-1 will be treated as outstanding sub stock on the date of the transaction during the five years preceding the sub reorganization controlled has not owned any shares of the stock of sub no two parties to the sub reorganization are investment companies as defined in sec_368 and iv on the effective date of the sub reorganization the fair_market_value of the assets of sub will exceed the sum of its liabilities plus the amount of liabilities if any to which the assets of sub are subject sub is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock_or_securities received in the exchange will not be used to satisfy the indebtedness of such debtor plr-100079-08 at the time of the sub reorganization the value of sub will exceed the value of controlled the sub reorganization will be a reverse_acquisition within the meaning of reg sec_1_1502-75 upon the completion of the sub reorganization controlled and its subsidiaries will become members of the sub group on at least one determination_date as defined in reg sec_1_897-2 during the period that includes the consecutive years ending immediately after the reverse_merger sub will be a united_states_real_property_holding_corporation as defined in sec_897 and reg sec_1_897-2 on at least one determination_date as defined in reg sec_1_897-2 during the period that includes the consecutive years ending immediately after the reverse_merger controlled will be a united_states_real_property_holding_corporation as defined in sec_897 and reg sec_1_897-2 immediately after the reverse_merger the class b controlled shares received by parent pursuant to the reverse_merger will be subject_to u s tax upon its disposition within the meaning of reg sec_1_897-5t the parties parent and sub will comply with the notice and filing_requirements of sec_897 sec_1445 reg sec_1_897-2 and temp_reg sec_1_897-5t as modified by notice_89_57 1989_2_cb_403 with respect to the sub reorganization controlled contribution and distribution the indebtedness if any 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 distributing in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing will treat all members of its separate_affiliated_group sag as defined in sec_355 as one corporation sub is and immediately after distribution will be affiliated with distributing in a manner that satisfies sec_1504 without regard to sec_1504 in applying sec_355 regarding the active_conduct_of_a_trade_or_business controlled will treat all members of its sag as defined in sec_355 as one corporation after the sub reorganization and immediately after distribution sub will be plr-100079-08 affiliated with controlled in a manner that satisfies sec_1504 without regard to sec_1504 the five years of financial information submitted on behalf of sub is representative of sub 27’s present operations and with regard to such corporation 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 sub is representative of sub 24’s present operations and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted following distribution distributing and controlled through their respective sags will each continue the active_conduct of its respective business independently and with its separate employees distribution will be carried out to facilitate the overall separation of business a from business b which will be carried out for the following corporate business purposes i alignment of entity organization with function ii potential to list business a stock iii acquisition currency transaction iv financing flexibility v guarantees and risk segregation and vi improved governance distribution is motivated in whole or in substantial part by one or more of these business purposes distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both 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 5-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 5-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 5-year period determined after applying sec_355 ending on the date of distribution plr-100079-08 distribution is not part of a plan or series of related transactions within the meaning of reg sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation the total fair_market_value of the assets that distributing will transfer to controlled will exceed the sum of i the total liabilities if any assumed within the meaning of sec_357 by controlled ii the amount of liabilities if any owed to controlled by distributing that are discharged or extinguished in the exchange and iii the amount of cash and the fair_market_value of the property if any other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing from controlled in the exchange the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after distribution the total adjusted_basis of the assets transferred by distributing to controlled in the controlled contribution will equal or exceed the sum of i the total liabilities if any assumed within the meaning of sec_357 by controlled and ii the total amount of money if any and the fair_market_value of other_property within the meaning of sec_361 if any transferred by controlled to distributing that will be distributed to distributing 1’s shareholders or transferred to distributing 1’s creditors pursuant to the plan_of_reorganization of distributing and controlled the liabilities assumed within the meaning of sec_357 by controlled and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred except with respect to the elimination or reduction of intercompany balances in connection with the transaction distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction except for indebtedness that may be created in the ordinary course of business no intercorporate debt will exist between distributing and controlled at the time of or subsequent to distribution immediately before distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see reg 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 reg sec_1_1502-13 as published by t d furthermore immediately before distribution there will be no excess_loss_account with respect to the controlled stock to be distributed see reg sec_1_1502-19 payments made in connection with all continuing transactions if any between plr-100079-08 distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the transaction are investment companies as defined in sec_368 and iv immediately after distribution taking into account sec_355 neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 distributing and controlled and their respective shareholders will each pay their own expenses if any incurred in connection with distribution there is no plan intention or formal or informal understanding to change the capital structure of controlled to eliminate the two-tiered voting structure of the controlled class a and class b stock established in the transaction at all relevant determination dates as defined in reg sec_1_897-2 during the period that includes the consecutive years ending on the date following distribution distributing will not be a united_states_real_property_holding_corporation as defined in sec_897 and reg sec_1_897-2 distributing with respect to a portion of the controlled class a shares distributed to foreign sub in distribution will comply with the notice and filing_requirements of sec_897 and sec_1445 and reg sec_1_897-2 and sec_1_897-5t distribution the indebtedness if any owed by controlled to distributing immediately after distribution will not constitute stock_or_securities no part of the consideration to be distributed by distributing to its shareholders will be received by any of distributing 2’s shareholders as a creditor employee or in any capacity other than that of a shareholder of distributing in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing and controlled will treat all members of their respective sags as one corporation sub is and immediately after distribution will be affiliated with distributing in a manner that satisfies sec_1504 without regard to sec_1504 after the sub reorganization and immediately after distribution sub will be affiliated with controlled in a manner that satisfies sec_1504 without regard to sec_1504 plr-100079-08 the five years of financial information submitted on behalf of sub is representative of its present operations and with regard to such operations 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 sub is representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted following distribution distributing and controlled through their respective sags will each continue the active_conduct of its respective business independently and with its separate employees distribution will be carried out for the following corporate business purposes i alignment of entity organization with function ii potential to list business a stock iii acquisition currency transaction iv financing flexibility v guarantees and risk segregation and vi improved governance distribution is motivated in whole or in substantial part by one or more of these business purposes distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both 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 5-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 5-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 5-year period determined after applying sec_355 ending on the date of distribution distribution is not part of a plan or series of related transactions within the meaning of reg sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a or greater interest within the meaning plr-100079-08 of sec_355 in distributing or controlled including any predecessor or successor of any such corporation except with respect to the elimination or reduction of intercompany balances in connection with the transaction distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction except for indebtedness that may be created in the ordinary course of business no intercorporate debt will exist between distributing and controlled at the time of or subsequent to distribution immediately before distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see reg sec_1_1502-13 and sec_1 in effect before the publication of t d 1995_2_cb_147 and as currently in effect reg sec_1_1502-13 as published by t d furthermore any excess_loss_account distributing may have in the stock of controlled will be included in income immediately before distribution see reg sec_1_1502-19 payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the transaction are investment companies as defined in sec_368 and iv immediately after distribution taking into account sec_355 neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 distributing and controlled and their respective shareholders will each pay their own expenses if any incurred in connection with distribution at all relevant determination dates as defined in reg sec_1_897-2 during the period that includes the consecutive years ending on the date following distribution distributing will not be a united_states_real_property_holding_corporation as defined in sec_897 and reg sec_1_897-2 distributing with respect to the controlled class a shares distributed to parent in distribution will comply with the notice and filing_requirements of sec_897 and sec_1445 and reg sec_1_897-2 and sec_1_897-5t foreign sub contribution no stock_or_securities will be issued for services rendered to or for the benefit of foreign sub in connection with the foreign sub contribution and no stock or plr-100079-08 securities will be issued by foreign sub in exchange for any indebtedness of foreign sub that is not evidenced by a security or for interest on indebtedness of foreign sub which accrued on or after the beginning of the holding_period of parent for the debt the foreign sub contribution is not the result of the solicitation by a promoter broker or investment house parent will not retain any rights in the property transferred in the foreign sub contribution foreign sub will not be a bank_holding_company within the meaning of sec_2 of the bank_holding_company act of foreign sub will neither assume nor take any assets subject_to any liabilities in connection with the foreign sub contribution there is no indebtedness between foreign sub and parent and there will be no indebtedness created in favor of parent as a result of the foreign sub contribution the transfers and exchanges composing the foreign sub contribution will occur under a plan agreed upon before the transaction in which the rights of the parties are defined all exchanges composing the foreign sub contribution will occur on approximately the same date parent has no plan or intention to dispose_of any shares of foreign sub stock following the foreign sub contribution there is no plan or intention on the part foreign sub to redeem or otherwise reacquire any shares of foreign sub stock to be issued in the foreign sub contribution taking into account any issuance of additional shares of foreign sub any issuance of shares for services the exercise of any foreign sub share rights warrants or subscriptions a public offering of foreign sub shares and the sale exchange transfer by gift or other_disposition of any of the shares of foreign sub to be received in the exchange parent will be in control of foreign sub within the meaning of sec_368 parent will receive stock of foreign sub approximately equal to the fair_market_value of the property it transfers to foreign sub in the foreign sub contribution assuming that the foreign sub contribution qualifies as a transaction described in plr-100079-08 sec_351 the value of the controlled stock received by foreign sub in the foreign sub contribution determined immediately after such contribution will equal or exceed foreign sub 2's aggregate adjusted_basis in such controlled stock as a result of the foreign sub contribution determined without applying sec_362 foreign sub will remain in existence and except as described in step of the transaction will retain and use the property transferred to it in a trade_or_business there is no plan or intention by foreign sub to dissolve controlled or dispose_of the controlled stock except as otherwise described in step of the transaction each of parent and foreign sub will pay its own expenses if any incurred in connection with the transaction foreign sub will not be an investment_company within the meaning of sec_351 and sec_1_351-1 parent is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock_or_securities received in the exchange will not be used to satisfy the indebtedness of such debtor foreign sub will not be a personal_service_corporation within the meaning of sec_269a the parties parent controlled and foreign sub will comply with the notice and filing_requirements of sec_897 sec_1445 reg sec_1_897-2 and temp_reg sec_1_897-5t as modified by notice_89_57 1989_2_cb_403 with respect to foreign sub contribution parent will retain all the foreign sub stock received in the foreign sub contribution for a period of at least one year and one day following the date on which parent contributes all the controlled shares to foreign sub rulings based solely on the information submitted and the representations made we rule as follows the subsidiary_liquidation sec_1 each subsidiary_liquidation will qualify as a complete_liquidation under sec_332 sec_332 plr-100079-08 distributing will recognize no gain_or_loss on each subsidiary_liquidation sec_332 distributing and sub will recognize no gain_or_loss on the sub liquidation sec_332 sec_1_1502-34 sub sub and sub each will recognize no gain_or_loss on its liquidation sec_336 sec_337 sub will recognize no gain_or_loss on its liquidating_distribution to distributing sec_336 sec_337 or on its liquidating_distribution of cash to distributing and sub distributing 1’s basis in each asset received from each liquidating subsidiary will equal the basis of that asset in the hands of the respective liquidating subsidiary immediately before the respective subsidiary_liquidation sec_334 distributing 1’s holding_period in each asset received from each liquidating subsidiary will include the period during which that asset was held by the respective liquidating subsidiary sec_1223 with respect to the liquidation of sub sub and sub distributing will succeed to and take into account the items of each liquidating subsidiary described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 reg sec_1 a - with respect to the liquidation of sub distributing distributing and sub will succeed to and take into account the items of sub described in sec_381 as provided for under sec_1_1502-80 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 reg sec_1_381_a_-1 and sec_1_1502-80 with respect to the liquidation of sub sub and sub except to the extent the earnings_and_profits of each such liquidating subsidiary are reflected in the earnings_and_profits of distributing distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of each such liquidating subsidiary as of the date of each respective subsidiary_liquidation sec_381 reg sec_1_381_c_2_-1 reg sec_1_1502-33 any deficit in the earnings_and_profits of such a liquidating subsidiary or distributing will be used only to offset earnings_and_profits accumulated after the date of the respective subsidiary_liquidation sec_381 with respect to the liquidation of sub except to the extent the earnings_and_profits of sub are reflected in the earnings_and_profits of distributing distributing and or sub respectively distributing distributing and 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 each subsidiary_liquidation as provided for under g sec_381 reg sec_1_381_c_2_-1 reg sec_1_1502-33 plr-100079-08 reg sec_1_1502-80 any deficit in the earnings_and_profits of sub sub or distributing will be used only to offset earnings_and_profits accumulated after the date of the liquidation of sub sec_381 the sub exchange the sub exchange will qualify as a transaction described in sec_351 sec_351 reg sec_1_1502-34 sub will recognize no gain_or_loss on the transfer of its sub shares to distributing in exchange for one share of distributing preferred_stock in the sub exchange sec_351 distributing will recognize no gain_or_loss on its receipt of the sub shares from sub in exchange for one share of distributing preferred_stock sec_1032 sub 4’s basis in the share of distributing preferred_stock received in the sub exchange will equal sub 4’s basis immediately before such exchange in the sub shares transferred to distributing in such exchange sec_358 sub 4’s holding_period in the share of distributing preferred_stock received in the sub exchange will include the holding_period during which sub held the sub shares provided that the sub shares were capital assets or assets described in sec_1231 sec_1223 distributing 1’s basis in each share of sub received in the sub exchange will equal sub 4’s basis in such share immediately before the exchange sec_362 sec_1_1502-80 distributing 1’s holding_period in the sub shares received in the sub exchange will include the holding_period during which sub held such sub shares sec_1223 the distributing preferred_stock will not be sec_306 stock sec_306 sec_1_1502-80 the sub reorganization the reverse_merger will qualify as a reorganization under sec_368 the reorganization will not be disqualified because voting_stock of controlled is used in the merger sec_368 transitory newco sub and controlled each will be a_party_to_a_reorganization under sec_368 plr-100079-08 transitory newco will recognize no gain_or_loss on the transfer of its assets to sub in constructive exchange for sub stock and the assumption by sub of related liabilities sec_361 and sec_357 sub will recognize no gain_or_loss on its receipt of assets of transitory newco in constructive exchange for sub stock sec_1032 controlled will recognize no gain_or_loss on its receipt of sub stock in constructive exchange for transitory newco stock sec_354 the basis sub will have in each transitory newco asset received in the reverse_merger will equal the basis of that asset in the hands of transitory newco immediately before the exchange sec_362 the holding_period sub will have for each transitory newco asset will include the period during which transitory newco held that asset immediately after the reverse_merger controlled’s basis in the stock of sub will equal the sum of a controlled’s basis in the stock of transitory newco immediately before the merger and b sub 2’s net asset basis within the meaning of reg sec_1_1502-31 reg sec_1_358-6 and sec_1_1502-31 the holding_period controlled will have in the stock of sub attributable to the stock of transitory newco will include the period during which controlled held the stock of transitory newco sec_1223 parent will recognize no gain_or_loss on the exchange of sub common_stock solely for controlled class b common_stock sec_354 parent’s aggregate basis in the controlled class b common_stock received in the transaction will equal the aggregate basis of the sub common_stock exchanged therefor sec_358 parent’s holding_period for the controlled class b common_stock received in the transaction will include the holding_period in the sub common_stock exchanged therefor provided the sub common_stock is a capital_asset in parent’s hands on the date of the exchange sec_1223 the sub reorganization will not cause the consolidated_net_operating_loss carryovers of the sub group to be subject_to the separate_return_limitation_year provisions of reg sec_1_1502-21 parent will not take gain_or_loss into account pursuant to sec_897 sec_897 and reg sec_1_897-6t the controlled contribution and distribution plr-100079-08 the controlled contribution followed by distribution will be a reorganization within the meaning of sec_368 and sec_355 distributing and controlled will each be a_party_to_a_reorganization under sec_368 distributing will recognize no gain_or_loss in the controlled contribution sec_361 and sec_357 controlled will recognize no gain_or_loss in the controlled contribution sec_1032 controlled’s basis in each asset received in the controlled contribution will be equal to the basis of the asset in the hands of distributing immediately prior to its transfer sec_362 controlled’s holding_period in each asset received in the controlled contribution will include the period during which distributing held the asset sec_1223 the aggregate adjusted_basis of the controlled class a shares received by distributing in the controlled contribution will equal the aggregate adjusted_basis of the sub subs and sub kk shares shares in the hands of distributing immediately before the controlled contribution sec_358 distributing will recognize no gain_or_loss on the distribution of the controlled class a shares in distribution sec_361 neither distributing nor parent will recognize gain_or_loss and otherwise will include no amount in income upon their receipt solely of the controlled class a shares in distribution sec_355 sec_356 the receipt of cash by parent equal to oo of the value of the controlled class a stock will be treated as a distribution_of_property to which sec_301 applies sec_356 sec_1 a the aggregate basis of the stock of distributing and controlled class a shares in the hands of each of distributing and parent respectively immediately after distribution will equal distributing 2’s and parent’s respective aggregate basis in the distributing stock held immediately before distribution decreased by the amount of cash received by such shareholder in distribution and increased by the amount of such cash treated as a dividend to such shareholder sec_358 and sec_358 the aggregate basis will be allocated with respect to each such shareholder between the distributing stock and the controlled class a stock held by such shareholder in proportion to the fair_market_value of such distributing stock and controlled class a stock in accordance with reg sec_1_358-2 sec_358 b plr-100079-08 distributing 2’s and parent’s respective holding periods in the controlled class a shares received in distribution will include distributing 2’s and parent’s respective holding periods in distributing stock with respect to which distribution is made provided that the distributing stock with respect to which such distribution is made is held as a capital_asset in the hands of such distributee on the date of distribution sec_1223 earnings_and_profits of distributing if any will be allocated between distributing and controlled in accordance with sec_312 and reg sec_1_312-10 and sec_1_1502-33 parent will not take gain_or_loss into account pursuant to sec_897 sec_897 and reg sec_1_897-6t and distribution distributing will recognize no gain_or_loss on its distribution of all its controlled class a shares to parent sec_355 sec_367 will not alter this conclusion as to the distribution of class a shares to parent because controlled is a domestic_corporation reg sec_1_367_e_-1 parent will recognize no gain_or_loss on the receipt of controlled class a shares in distribution sec_355 the aggregate basis of the stock of distributing and controlled class a shares received in distribution in the hands of parent immediately after distribution will equal parent’s aggregate basis in the distributing stock held immediately before distribution allocated between the distributing stock and such controlled class a stock in proportion to the fair_market_value of each in accordance with reg sec_1_358-2 sec_358 b the holding_period for the controlled class a shares distributed to parent in distribution will include the period during which parent has held its distributing shares sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with the rules set forth in sec_312 and reg sec_1_312-10 and sec_1_1502-33 parent will not take gain_or_loss into account pursuant to sec_897 sec_897 and reg sec_1_897-6t and foreign sub contribution the foreign sub contribution will qualify as a transaction described in sec_351 sec_351 plr-100079-08 parent will recognize no gain_or_loss on the transfer of the controlled class a and class b shares to foreign sub in exchange for foreign sub stock in the foreign sub contribution sec_351 foreign sub will recognize no gain_or_loss on its receipt of the controlled class a and class b shares from parent in exchange for foreign sub stock sec_1032 parent’s basis in the foreign sub stock received in the foreign sub contribution will equal parent’s basis in the controlled class a and class b shares immediately before the foreign sub contribution sec_358 parent’s holding_period in the foreign sub stock will include the holding_period during which parent held the controlled class a and class b stock provided that such controlled class a and class b shares were capital assets or assets described in sec_1231 sec_1223 foreign sub 2’s basis in the controlled class a and class b shares received in the foreign sub contribution will equal parent’s basis in such shares immediately before the exchange sec_362 foreign sub 2’s holding_period in the controlled class a and class b shares received in the exchange will include the holding_period during which parent has held such shares sec_1223 parent will not take gain_or_loss into account pursuant to sec_897 sec_897 reg sec_1_897-6t and notice_2006_46 c b caveat except as specifically ruled above no opinion is expressed concerning the federal_income_tax consequences of the transactions described above including the adjustments to earnings_and_profits or deficits in earnings_and_profits if any in any of the transactions to which sec_367 or b apply to the extent not otherwise specifically ruled upon above any other consequences under sec_367 on any internal restructuring transaction in this ruling letter foreign sub 3’s election to be treated as an entity disregarded from parent for u s federal tax purposes and whether distribution or distribution satisfies the business_purpose requirement of sec_1_355-2 whether distribution or distribution is being used principally as a device for the distribution of earnings_and_profits of distributing plr-100079-08 distributing or controlled see sec_355 and sec_1_355-2 and whether distribution or distribution and an acquisition are part of a plan or series of related transactions under sec_355 procedural statements the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 _stephen p fattman_______ stephen p fattman special counsel to the associate chief_counsel corporate office of associate chief_counsel corporate


internal_revenue_service index no department of the treasury number release date p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-121409-98 date date legend applicant museum loan agreement this is in response to a date letter from your authorized representative requesting a ruling that works_of_art you have loaned to a museum located in the united_states museum will not be deemed property within the united_states under sec_2105 of the internal_revenue_code the facts as submitted indicate that applicant is not a citizen or resident_of_the_united_states currently works_of_art owned by applicant are on loan to the museum most of these works_of_art have been on loan to the museum since the applicant purchased all but two of the works_of_art in countries outside the united_states and imported the works_of_art into the united_states during for loan to and exhibition at public museums applicant purchased two of the works_of_art in the united_states and immediately loaned them to museums after purchase the museum is a public museum no part of the net_earnings of the museum inures to the benefit of any private stockholder or individual the museum uses the loaned works_of_art solely for display purposes and displays a significant percent of the subject works_of_art at any given time on a rotating basis the items not currently on display are stored by the museum the works_of_art currently on loan to the museum are subject_to a loan agreement between applicant and the museum under the loan agreement applicant will leave the works_of_art with the museum for at least months from the date the museum took possession and for an indefinite number of years thereafter during that months applicant had the right to remove up to works_of_art from the total number loaned to the museum in at the end of the months applicant and applicant’s executors have the right to remove any part of the loaned works_of_art at three months’ notice it is likely that the works_of_art will be located at the museum at the time of applicant’s death therefore you have requested a ruling that assuming that as of his death applicant remains a nonresident_not_a_citizen_of_the_united_states and the works_of_art are then on loan to the museum subject_to the loan agreement and the conditions described above the works_of_art will not be deemed to be property within the united_states under the provisions of sec_2105 of the internal_revenue_code and therefore will not be includible in applicant’s united_states gross_estate if any for federal estate_tax purposes subchapter_b of chapter of the code sec_2101 through pertains to the taxation of estates of decedents who are nonresidents not citizens of the united_states sec_2101 imposes a tax on the transfer of the taxable_estate determined as provided in sec_2106 of every decedent nonresident_not_a_citizen_of_the_united_states sec_2106 provides that the value of the taxable_estate is determined by deducting various items from the value of that part of the decedent's gross_estate which at the time of his or her death is situated in the united_states sec_2103 provides that for the purpose of the tax imposed by sec_2101 the value of the gross_estate of every decedent nonresident_not_a_citizen_of_the_united_states shall be that part of his or her gross_estate which at the time of his or her death is situated in the united_states sec_20_2104-1 of the estate_tax regulations provides that property of a nonresident who is not a citizen_of_the_united_states at the time of his or her death is considered to be situated in the united_states if it is tangible_personal_property located in the united_states except for certain works_of_art on loan for exhibition as described in sec_20_2105-1 under sec_2105 and sec_20_2105-1 works_of_art owned by a decedent who was a nonresident_not_a_citizen_of_the_united_states shall not be deemed property within the united_states if the works_of_art are imported into the united_states solely for exhibition purposes loaned for that purpose to a public gallery or museum no part of the net_earnings of which inures to the benefit of any private stockholder or individual and at the time of the death of the owner on exhibition or en route to or from exhibition in the public gallery or museum based upon facts and information submitted we conclude that sec_2105 of the code applies to the works_of_art therefore we rule that assuming that as of his death applicant remains a nonresident_not_a_citizen_of_the_united_states and the works_of_art are then on loan to the museum subject_to the loan agreement the works_of_art will not be deemed to be property within the united_states under the provisions of sec_2105 of the internal_revenue_code and therefore will not be includible in applicant’s united_states gross_estate if any for federal estate_tax purposes in so concluding we consider the whole collection to be on exhibition for purposes of sec_2105 even though only part of the collection will actually be on display to the public at any given time on a rotating basis further we believe that sec_2105 applies equally to the of the items that were purchased in the united_states and immediately loaned to museums after purchase in this regard the applicability of sec_2105 does not depend upon the fulfillment of a useless act such as exporting the items and then importing them back into the united_states except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel passthroughs and special industries branch by katherine a mellody assistant to the chief enclosure copy for sec_6110 purposes


tax exempt and government entities release number date date uil code serre rer es rerkkekrkrk sarrer erne department of the treasury internal_revenue_service washington d c rerrreerek identification_number kkrerekrek contact number rrrrekerer employer_identification_number rekerekker form required to be filed hrerererker tax years hekkkerrrek dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty file the returns in accordance we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice action if you agree with our deletions you do not need to take any further if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely karen schiller acting director exempt_organizations rulings and agreements department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date uil srrrenees contact person identification_number sree contact number rrrrrerere fax number employer_identification_number legend date state descriptiont xx description2 dear rxekrkreere rrrrereree reerkreekkae krreereekrekr we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under sec_501 the basis for our conclusion is set forth below facts you incorporated on date in state as a nonprofit membership corporation your articles of incorporation state that you are organized in part t o be a liaison between the description1 community of state and the x party of state you state that your first and foremost focus as an organization is to promote participation in the x party you state that you spend of your time and resources on activities to further this purpose according to dollar_figure of your bylaws your objectives are as follows a to develop a statewide intelligent aggressive and serviceable x organization b c to provide through this organization a practical program for the betterment of the x party of state and of the various political subdivisions thereof and to establish chapters who will tmprove the public relations of the x party of state in supporting state x political campaigns encouraging public forums and social programs rekerereeek and in attracting a greater number of voters to work to advance the interests of the x party of state and the state sec_2 b of your bylaws provides that one of your powers is to create and charter chapters of you and supervise and coordinate them you have chapters across the state that hold forums debates community service projects and mixers through your chapters you encourage citizens of state and the united_states to become involved in the x party as precinct chairs volunteers grassroots workers and media surrogates according to dollar_figure of your bylaws your eligible members must be american citizens of good moral character who are registered to vote as members of the x party and residents of state section a of your bylaws provides that membership may be terminated whenever your board has determined that a member has publicly supported or registered as a member of a political_party other than the x party us ed his name and title as a member of you in publicly advocating that the electorate should not vote for the x nominee for any elected political office usfed his name and title as a member of you in giving support or avowing a preference for a candidate of another party for election to an elected public_office if that candidate is opposed by a x candidate usf ed his name and title as a member of you in endorsing candidates running for any public officer whether partisan or non-partisan or for office in the state x party without a vote of the delegates at a local endorsing committee in accordance with article xxi claim ed to represent any of your chapters that has not been duly chartered by the board_of directors or otherwise bring s discredit or disrepute upon you provided that at least thirty days before such action notice of intended action shall have been duly sent by certified mail by the membership secretary to the member in question article xx of your bylaws provides procedures for the endorsement of state candidates recall of state elected officials these procedures allow your chapters to conduct state endorsing conventions sec_21 a provides that neither you nor any of your chartered chapters can endorse any candidate for any public_office whether partisan or non-partisan unless the candidate is a duly-registered member of the x party you state your second focus is to work within the x party and promote the active pursuit of the description1 or description2 voting demographic you visit executive committee meetings meet with party volunteers officials and precinct chairs to explain the need to focus party resources on the description’ vote you state that ijt is imperative that you increase the participation of this demographic in civic life you state that you spend of your time and resources on this activity rekrkrkrree you state your last focus is to visit with x political leaders to express your desire for certain key legislation that you believe will affect your goal and effectiveness you state you spend of your time and resources on this activity you receive financial support from dues member donations and sponsorships law sec_501 exempts from federal_income_tax organizations described in sec_501 sec_501 describes civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare sec_501 indicates that subparagraph a shall not apply to an entity unless no part of the net_earnings of such entity inures to the benefit of any private_shareholder_or_individual sec_1_501_c_4_-1 states that an organization may be exempt as an organization described in sec_501 if it is not organized or operated for profit and is operated exclusively for the promotion of social welfare sec_1_501_c_4_-1 provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community sec_1_501_c_4_-1 provides that the promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of or in opposition to any candidate for public_office revrul_73_306 1973_2_cb_179 provides that an organization formed for the purpose of promoting the common interest of tenants who reside in a particular apartment complex does not qualify for exemption under sec_501 any person regularly living in the complex was eligible for membership the organization represented its member-tenants in negotiations with the management of the complex in order to secure better maintenance and services as well as reasonable rentals the ruling holds that the organization was not described in sec_501 because it operated essentially to benefit its members and thus was not primarily engaged in activities that promote the common good and general welfare of the community in contrast revrul_80_206 1980_2_cb_185 holds that an organization formed to promote the legal rights of all tenants in a community instead of limiting its benefits to member-tenants does qualify for exemption under sec_501 revrul_73_349 1973_2_cb_179 holds that an organization formed to purchase groceries for its members at the lowest possible prices on a cooperative basis is not exempt under sec_501 rather the organization was a cooperative enterprise operated primarily for the private economic benefit or convenience of its members and provided only incidental benefit to the community revrul_75_286 1975_2_cb_210 describes an organization that was formed by the residents rekrekerkee of a city block to preserve and beautify that block to improve all public facilities within the block and to prevent physical deterioration of the block its activities consisted of paying the city government to plant trees on public property within the block organizing residents to pick up litter and refuse in the public streets and on public sidewalks within the block and encouraging residents to take an active part in beautifying the block by placing shrubbery in public areas much of the public area the organization improved was part of the public roadway lying between the sidewalk and the street in front of private property owned by members of the organization membership in the organization was restricted to residents of the block and those owning property or operating businesses there because the activities enhanced the value of the members’ property rights the organization served the private interests of its members and did not qualify for exemption under sec_501 the restricted nature of its membership and limited area in which improvements were made were further indicators of private benefit however by beautifying and preserving public property in cooperation with the local_government the organization was considered to primarily promote the general welfare of the community even though its activities also benefited its members therefore the organization did qualify under sec_501 revrul_80_107 1980_1_cb_117 provides that an organization formed to promote the interests of the public_utility industry and its shareholders in rate and regulatory matters before administrative agencies and legislative bodies does not qualify for exemption under sec_501 the ruling holds that because the primary beneficiaries of the organization's activities were its members together with other individuals who own shares in the public_utility companies it was primarily operated to serve private interests rather than the community as whole in 488_f2d_684 2d cir cert_denied 419_us_827 plumbers working in new york city were responsible for the cuts they made in the city streets prior to the organization’s existence the city had repaired the cuts and billed the plumbers individually in what proved to be a highly inefficient system the organization was formed in order to restore the city streets it only repaired cuts made by its members the joint effort of the plumbers reduced their liability and their expenses and more efficiently repaired the city streets while the court found that the program provided substantial benefits to the public it concluded that the organization primarily served the private economic interests of its members and thus could not be considered exempt under sec_501 in 305_f2d_814 4th cir a corporation was organized by world war ii veterans for the purpose of purchasing a government housing project and converting it to cooperative nonprofit housing for its members individuals became members in the corporation by purchasing an apartment unit and as such the number of members was limited to the number of units available the court held that the organization was not described in sec_501 because it was a public-spirited but privately-devoted endeavor’ that provided in 316_f2d_151 3d cir the court held that to qualify for exemption within the meaning of sec_501 the organization must be a community movement designed to accomplish community ends id pincite rekekrrkrere only incidental benefit to the community id pincite the organization did not promote social welfare because it furnished housing only to a certain group of individuals rather than on a community basis and did not offer a service or program for the direct betterment or improvement of the community as a whole in 54_tc_1325 an association organized by a small_group interested in obtaining group_insurance did not qualify for exemption because it offered its benefits to only a limited class of its members and their employees the court noted t here is not in such an organization the requisite civic concern to constitute ‘social welfare required for qualification under sec_501 id pincite where the primary benefit from an organization is limited to that organization's members and not provided to the community as a whole the organization is not operated primarily for the social welfare in 92_tc_1053 the organization’s primary activity was to operate a school the academy’ that trained individuals for careers as political campaign professionals the organization represented on its application_for exemption that the academy was an outgrowth of programs operated by the national republican congressional committee nrcc’ that were designed to train candidates and subsequently place campaign professionals in republican campaigns in addition the nrcc contributed physical assets to the academy two of the academy's six full-time faculty members had been previously involved in the nrcc’s training program one of the academy's three initial directors was the executive director of the nrcc at the time and another initial director was a member of the republican national committee at the time the academy’s activities were exclusively funded by the national republican congressional trust the academy’s curriculum included discussions concerning how some republicans have won black votes nrcc rnc nrsc state party naughtiness and use of gop allies without a counterbalance of comparable studies of other political parties while applicants to the academy were not required to formally declare their political affiliation to attend the organization’s school the admission panel could deduce such affiliation from the campaign experiences and political references in the applications the court found that this knowledge of an applicant's political affiliations allowed the admission panel to limit enrollment to applicants who were likely to subsequently work in republican organizations and campaigns indeed the court found that no graduate was known to affiliate with any political_party other than the republican party a substantial number of the members of the academy’s admission panel were affiliated with the republican party the service determined that the organization operated for a substantial non-exempt private purpose the court agreed holding the organization did not operate exclusively for exempt educational_purposes under sec_501 because it conducted its activities to benefit the private interests of republican entities and candidates although these entities and candidates were not organization insiders the court stated that the conferral of nonincidental benefits on disinterested persons may cause an organization to serve a private interest while the school had a legitimate educational program it conducted these activities with the partisan objective of benefiting republican candidates and entities as such a more than incidental private benefit rrrerrerer was conferred on republican entities and candidates who employed the academy’s students one that precluded exemption under sec_501 analysis based on our analysis of the information you submitted with your application we have determined that you are not operated exclusively for the promotion of social welfare within the meaning of sec_501 because your activities primarily serve private interests therefore you do not qualify for exemption from federal_income_tax as an organization described in sec_501 private benefit to the x party an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community sec_1_501_c_4_-1 an organization recognized under sec_501 is operated primarily for the purpose of bringing about civic betterments and social improvements id to qualify for exemption under sec_501 an organization must primarily benefit the community as a whole rather than select individuals or groups see lake forest inc f 2d pincite contracting plumbers coop restoration corp f 2d pincite new york state ass'n of real_estate bds group ins fund t c pincite revrul_80_107 supra revrul_75_286 supra a sec_501 organization must be a community movement designed to accomplish community ends erie endowment f 2d pincite as such a tenants’ organization that benefits all the tenants in the community qualifies for exemption while one that directs its activities toward benefiting only its member-tenants does not compare revrul_80_206 supra with revrul_73_306 supra see also revrul_73_349 supra therefore conferring a sufficient amount of private benefit on select individuals will preclude exemption under sec_501 for an organization that would otherwise qualify even if an organization substantially benefits the community it will fail to qualify for exemption if it primarily benefits private interests see contracting plumbers f 2d pincite in american campaign academy the court denied exemption under sec_501 to a school organized to train individuals for careers as political campaign professionals because its educational activities were operated with the partisan purpose of benefiting republican party entities and candidates t c pincite the private benefit conferred on these persons was more than incidental and thus demonstrated a substantial nonexempt purpose that precluded exemption while you are an organization described in sec_501 and not sec_501 as was american campaign academy the standard for determining what constitutes private benefit described in american campaign academy applies to both sections as such for purposes of both sec_501 and sec_501 an organization which conducts its activities to benefit a political_party and its candidates serves private interests and as discussed above an organization that primarily serves private interests fails to qualify for exemption under sec_501 you are not primarily engaged in promoting the common good and general welfare of the rekkkkrekk people of the community you fail to qualify for exemption because your program and activities primarily benefits the interests of the x party you are engaged primarily in promoting participation in the x party endorsing x candidates and promoting the active pursuit of the description or description2 voting demographic by the x party you have stated that of your time and resources are devoted to these activities because you conduct your activities with the objective of benefiting the interests of the x party you are similar to the organization described in american campaign academy your first and foremost focus as an organization is to promote participation in the x party you stated that you will develop a statewide intelligent aggressive and serviceable x organization and that you will provide a practical program for the betterment of the x party of state your chapters will work to improve the public relations of the x party of state in supporting x political campaigns encouraging public forums and social programs and in attracting a greater number of voters to work to advance the interests of the x party of state and the state your only members are registered x voters membership in your organization can be terminated for advocating against x nominees for any elected political office and or if a member uses his or her name and title as a member of you in giving support or endorsing a candidate of another if that candidate is opposed by an x candidate you also will use your time and resources to work within the x party to promote the active pursuit of the description’ or description2 voting demographic to increase the participation of this demographic in civic life you state that you will do this through visiting executive committee meetings meeting with party volunteers officials and precinct chairs in order to focus party resources on the description1 vote such activity does not promote the common good and general welfare of the community rather it benefits private interests in particular the x party see sec_1_501_c_4_-1 candidate endorsements you will endorse x party candidates in state elections and recalls of state officials your bylaws provide that you will only endorse candidates for public_office that are duly-registered as members of the x party sec_1_501_c_4_-1 provides that the promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of or in opposition to any candidate for public_office therefore these activities do not promote social welfare within the meaning of sec_501 conclusion in summary you are not operated primarily to promote social welfare because your activities are conducted primarily for the benefit of private interests rather than the community as a whole or as participation in political campaigns accordingly you do not qualify for exemption as an organization described in sec_501 and you must file federal_income_tax returns you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the rrekkkeeke statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you if you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service rerrererae hakekrekeae constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter if you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely karen schiller acting director eo rulings and agreements