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 b06 plr-132430-12 date date legend distributing controlled acquiring merger sub sub sub sub ---------------------------- -------------------------------- ------------------------ --------------------------------- ------------------------------------------------- ---------- --------------------------- -------------------------------- ------------------------ ------------------------- ------------------------------------------------- ---------- -------------------------- ---------------------------- ------------------------ ------------------------------- ---------------------------------- ------------------------ -------------------------------------------- plr-132430-12 sub sub sub sub sub sub sub sub llc llc llc ---------------------------- ------------------------ --------------------------------- ---------------------------------- ------------------------ ------------------------------------ --------------------------------- ------------------------ --------------------------- ---------------------------- ------------------------ ------------------------------ -------------------------------- ------------------------ ------------------------------------------- ---------------------------------- ------------------------ ----------- ---------------------------------------- ---------- -------------------------------------------------- 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-------------------------------------------------- ---------- --------------------------------------------- -------------------------------------------- ---------- ---------------------------------- --------------------------------------------------- ---------- --------------------------------------- ------------------------------------------------- ---------- ---------------------------- -------------------------------------------- ---------- -------------------------------------------------- ------------------------------------------------- ---------- -------------------------------- llc llc llc llc llc llc llc llc llc llc llc plr-132430-12 llc shareholder a shareholder b shareholder c shareholder d shareholder e business a business b business c concerns -------------------------------------------- ---------- -------------------------------------------- ------------------------------------------------- ---------- ---------------------- ------------------------------------------ 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------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- plr-132430-12 organization entities other entities risks type a type b approval re-financing call_right obligations provisions interest rate grade credit rating agency a credit rating agency b other agreements special dividend acquiring special share repurchase state a ---------- -------------------------------------------------- --------------------------------------------------------------------- -------------------------------- ----------------------------------------- ------------------------------------------------ -------- --------------------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- --------------------------- ---------------------------------------- --------------------------------------------------------------------------- -------------------------- ------------------------ -------------------------------------- ------------------------- ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------- --- ------------------------------------------------------------------------------------------- ----------------------------------- -------------- plr-132430-12 a b c d e f g h i j k l m date date date ---- ---- ---- ------------ ----------- ----------- ---- -- ---------------- ---- -- ---- -- ---------------------- -------------------------- ------------------- dear --------------------- this letter responds to your date letter requesting rulings on certain federal_income_tax consequences of the proposed transaction defined below the information provided in that letter 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 penalties of perjury statement executed by the appropriate parties this office has not verified any of the materials submitted in plr-132430-12 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 distribution defined below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of distributing controlled 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 distributing or controlled see sec_355 and sec_1_355-7 summary of facts distributing is the common parent of an affiliated_group whose includible corporations join in filing a consolidated federal_income_tax return the distributing group the authorized and outstanding capital stock of distributing consists of one class of common_stock the distributing common_stock the distributing common_stock is publicly traded and widely held based on publicly available securities information only shareholder a shareholder b shareholder c shareholder d and shareholder e held five percent or more of the distributing common_stock as of date distributing wholly owns among other things controlled which was formed in connection with the proposed transaction defined below on date as a disregarded_entity and distributing owns all of the outstanding common_stock or membership interests as the case may be of each of sub sub sub sub sub sub sub sub and the other entities sub will be wholly-owned by distributing and may be a pre-existing entity or newly formed by distributing in connection with the proposed transaction defined below sub owns all of the outstanding common_stock of sub sub owns all of the outstanding common_stock of sub each of distributing and sub through sub is or perhaps in the case of sub will be classified as a corporation for federal tax purposes under sec_301_7701-2 and sec_3 each of sub sub sub and sub has outstanding publicly-traded non-voting preferred_stock or membership interests that qualify under sec_1504 and sub has outstanding publicly-traded voting preferred membership interests distributing and the members of its separate_affiliated_group as defined in sec_355 the distributing sag directly engage in business a through activity of sub which is a segment of business b financial information has been submitted indicating that business a has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years as a result of the proposed transaction controlled and the members of its separate_affiliated_group as defined in sec_355 the controlled sag will directly engage in business c which currently is a segment of business b financial information has been submitted plr-132430-12 indicating that business c has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years the distribution defined below is motivated in whole or substantial part by the following corporate business purposes i protecting distributing’s credit quality by insulating business b from significant projected capital expenditures of business c and increasing controlled’s access to capital markets ii permitting controlled management to focus on the concerns iii creating an independent company for business c that is in conjunction with organization the best model to drive economic efficiency and achieve the most open and transparent markets and to create efficient use and expansion in business c iv reducing distributing’s and the entities’ exposure to risks of business c while reducing business c’s exposure to the risks of business b and v facilitating the acquiring merger defined below i through v collectively the corporate business purposes proposed transaction for what are represented to be valid business purposes distributing proposes to effect the distribution defined in step xlvii the following steps have been proposed collectively the proposed transaction to implement the distribution i a sub formed llc the llc formation b sub formed llc the llc formation c sub formed llc the llc formation d sub formed llc the llc formation e sub formed llc the llc formation and f sub formed llc the llc formation and together with the llc formation the llc formation the llc formation the llc formation and the llc formation the type a subsidiaries formations the entities formed in the type a subsidiaries formations collectively the type a subsidiaries and individually a type a subsidiary no election will be made to treat any type a subsidiary as a corporation for u s federal_income_tax purposes ii one or more issuances effectuated at least a days prior to the effective date of the distribution as defined in step xlvii and the debt exchange as defined in step l iii distributing notes to sub iv distributing notes to sub which will contribute such proceeds to sub v distributing notes to sub distributing will contribute a portion of the proceeds from the issuance of the distributing will contribute a portion of the proceeds from the issuance of the distributing will contribute a portion of the proceeds from the issuance of the distributing will issue debt the distributing notes to unrelated creditors in each of sub sub sub sub and sub will redeem all of its distributing will contribute a portion of the proceeds from the issuance of the distributing will contribute a portion of the proceeds from the issuance of the distributing will contribute a portion of the proceeds from the issuance of the plr-132430-12 vi distributing notes to sub which will contribute such proceeds to sub vii distributing notes to sub viii distributing notes to sub ix outstanding preferred_stock or preferred membership interests as the case may be from holders that are not otherwise affiliated with distributing llc will issue debt the llc notes to unrelated creditors in one or more x issuances effectuated prior to the effective time of the llc distribution as defined in step xx xi llc will issue debt the llc notes to unrelated creditors in one or more issuances effectuated prior to the effective time of the llc distribution as defined in step xxv xii llc will issue debt the llc notes to unrelated creditors in one or more issuances effectuated prior to the effective time of the llc distribution as defined in step xxix xiii llc will issue debt the llc notes to unrelated creditors in one or more issuances effectuated prior to the effective time of the llc distribution as defined in step xxxiv xiv llc will issue debt the llc notes to unrelated creditors in one or more issuances effectuated prior to the effective time of the llc distribution as defined in step xxxviii xv llc will issue debt the llc notes to unrelated creditors in one or more issuances effectuated prior to the effective time of the llc distribution as defined in step xlii xvi llc and llc collectively the holding_company llcs b sub will form llc and c sub will form llc collectively with llc llc llc llc and llc the type b opco llcs and the holding_company llcs collectively with the type b opco llcs the type b llcs and each individually a type b llc no election will be made to treat any of these newly formed subsidiaries as a corporation for u s federal_income_tax purposes a distributing will form llc llc llc llc llc and llc distributing will contribute its ownership interests in i llc and ii the other llc will distribute all of its membership interests in llc to distributing the plr-132430-12 xvii distributing will cause controlled to elect to be treated as a corporation for u s federal_income_tax purposes xviii sub will merge with and into llc with llc surviving the sub merger xix llc will contribute all of its business c assets and liabilities to llc such transaction the llc contribution in exchange for the proceeds from the issuance of the llc notes in step x xx llc distribution xxi entities to sub the llc contribution the llc contribution will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii xxii xxiii sub will merge with and into llc with llc surviving the sub merger xxiv llc will contribute all of its business c assets and liabilities to llc such transaction the llc contribution in exchange for the proceeds from the issuance of the llc notes in step xi xxv llc will distribute all of its membership interests in llc to llc which will distribute such membership interests to distributing such transactions the llc distribution xxvi llc will merge with and into sub with sub surviving the llc contribution the llc contribution will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii xxvii sub will merge with and into llc with llc surviving the sub merger xxviii transaction the llc contribution in exchange for the proceeds from the issuance of the llc notes in step xii sub will merge with and into llc with llc surviving the sub merger llc will contribute all of its business c assets and liabilities to llc such plr-132430-12 xxix llc will distribute all of its membership interests in llc to distributing the llc distribution xxx distributing will contribute its membership interests in llc to sub the llc contribution the llc contribution will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii xxxi sub will merge with and into llc with llc surviving the sub merger and collectively with the sub merger the holdco mergers xxxii sub will merge with and into llc with llc surviving the sub merger xxxiii llc will contribute all of its business c assets and liabilities to llc such transaction the llc contribution in exchange for the proceeds from the issuance of the llc notes in step xiii xxxiv llc will distribute all of its membership interests in llc to llc which shall distribute such membership interests to distributing such transactions the llc distribution xxxv llc will merge with and into sub with sub surviving the llc contribution the llc contribution will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii xxxvi sub will merge with and into llc with llc surviving the sub merger xxxvii llc will contribute all of its business c assets and liabilities to llc such transaction the llc contribution in exchange for the proceeds from the issuance of the llc notes in step xiv xxxviii llc will distribute all of its membership interests in llc to distributing the llc distribution xxxix distributing will contribute its membership interests in llc to sub the llc contribution the llc contribution will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii xl merger collectively with the sub merger the sub merger the sub merger the sub will merge with and into llc with llc surviving the sub llc will contribute all of its business c assets and liabilities to llc such plr-132430-12 sub merger and the sub merger the opco mergers each individually an opco merger and the opco mergers collectively with the holdco mergers the upstream mergers and each individually an upstream_merger xli transaction the llc contribution and collectively with the llc contribution the llc contribution the llc contribution the llc contribution and the llc contribution the type a contributions in exchange for the proceeds from the issuance of the llc notes in step xv xlii llc will distribute all of its membership interests in llc to distributing the llc distribution and collectively with the llc distribution llc distribution llc distribution llc distribution and llc distribution the type a distributions and each individually a type a distribution xliii distributing will contribute its membership interests in llc to sub the llc contribution and collectively with the llc contribution llc contribution llc contribution llc contribution and llc contribution the sub contributions each individually a sub contribution and collectively with the respective upstream_merger s type a contribution and type a distribution the opco transactions the llc contribution will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii the opco transactions for each respective opco may occur in a different order vis-à-vis the opco transactions for any other opco than as set forth in the order of the steps described herein for the proposed transaction xliv distributing will form llc sub will merge with and into llc with llc surviving step xliv a thereafter distributing will contribute llc to sub step xliv b step xliv b will occur only after distributing receives approval for such contribution which may not occur until after the distribution as defined in step xlvii no election will be made to treat llc as a corporation for u s federal_income_tax purposes xlv distributing will contribute to controlled all of the outstanding membership interests of the type a subsidiaries and cash in exchange for controlled stock the controlled stock and the controlled indebtedness the controlled indebtedness such transaction the contribution xlvi sub will sell to controlled or one or more type a subsidiaries a building certain leases and certain computer hardware and software each associated with business c for cash and the assumption of certain liabilities xlvii pursuant to a resolution of its board_of directors distributing will either a distribute all of the controlled stock pro_rata to its shareholders the spin-off or b i plr-132430-12 conduct an exchange_offer the exchange_offer to exchange controlled stock for distributing stock the exchange and ii in the event that the exchange_offer is undersubscribed or is otherwise not effectuated distribute pro_rata to distributing shareholders any remaining shares of controlled stock held by distributing the subsequent distribution and collectively with the exchange the splint-off and either such splint-off or such spin-off the distribution as effectuated through the mechanics described herein to the extent the distribution will take the form of the spin-off distributing will transfer the controlled stock to a distribution agent the distribution agent and to the extent the distribution will take the form of the splint-off distributing will transfer the controlled stock to an exchange agent the exchange agent and either the exchange agent or the distribution agent the agent in either case the agent will hold the controlled stock on behalf of the shareholders entitled to receive such stock in the distribution xlviii after the transfer of the controlled stock to the agent in step xlvii acquiring will cause merger sub to merge with and into controlled with all of the controlled stock including the controlled stock held by the agent being exchanged solely for acquiring voting_stock acquiring stock and such transaction acquiring merger in the acquiring merger distributing expects that the controlled shareholders ie historic distributing shareholders will receive more than b percent treating fractional shares of acquiring stock as received by the controlled shareholders in the acquiring merger but less than c percent of the stock of acquiring any fractional shares of acquiring stock that would otherwise be issuable in the acquiring merger will be transferred to the agent and sold on the open market on behalf of the controlled shareholders that would have received such fractional acquiring shares the net_proceeds of such sales will be distributed to the shareholders who would have otherwise been entitled to receive the fractional shares as soon as practicable after the acquiring merger and the distribution the first fractional shares sales prior to the acquiring merger acquiring will cause merger sub to elect to be treated as a corporation for u s federal_income_tax purposes xlix agent will distribute the shares of acquiring stock it holds to the shareholders entitled to receive shares of controlled stock as part of the spin-off in step xlvii to the extent the distribution will take the form of the splint-off the exchange agent will exchange the shares of acquiring stock it holds for shares of distributing stock with those shareholders that had elected to exchange their shares of distributing stock for shares of controlled stock in the exchange in step xlvii and then will distribute any remaining shares of acquiring stock pro_rata to the remaining distributing shareholders as part of the subsequent distribution as in the first fractional shares sale any fractional shares of acquiring stock otherwise issuable in this step will be sold by the agent in the open market on behalf of the shareholders that would have received the fractional shares of acquiring stock and the net_proceeds of such sales will be distributed to such shareholders on a pro_rata basis as soon as practicable after this step the second fractional shares sale and collectively with the first fractional shares sale the to the extent the distribution will take the form of the spin-off the distribution using the cash received in a the llc contribution in step xix and b the on or about the effective time of the distribution distributing expects to transfer plr-132430-12 fractional shares sales if taken into account for purposes of sec_355 the fractional shares sales would cause the distribution to be treated as a distribution to which sec_355 applies and this fact has been specifically considered in issuing ruling l all of the controlled indebtedness to the holders of the distributing notes in exchange for all or a portion of the distributing notes the debt exchange li contribution by distributing in step iii llc will repay historic external debt of sub the llc historic debt repayment lii using the cash received in a the llc contribution in step xxiv and b the contribution by sub in step iv llc will repay historic external debt of sub the llc historic debt repayment liii contribution by distributing in step v llc will repay historic external debt of sub the llc historic debt repayment using the cash received in a the llc contribution in step xxxiii and b the liv contribution by sub in step vi llc will repay historic external debt of sub the llc historic debt repayment using the cash received in a the llc contribution in step xxxvii and b lv the contribution by distributing in step vii llc will repay historic external debt of sub the llc historic debt repayment lvi using the cash received in a the llc contribution in step xli and b the contribution by distributing in step viii llc will repay historic external debt of sub the llc historic debt repayment and collectively with the llc historic debt repayment the llc historic debt repayment the llc historic debt repayment the llc historic debt repayment and the llc historic debt repayment the opcos historic debt repayment it is possible the opcos historic debt repayment will occur prior to the sub contributions and or the distribution using the cash received in a the llc contribution in step xxviii and b the continuing agreements distributing and certain of its affiliates controlled and acquiring have entered into or will enter into certain agreements in connection with the implementation of the proposed transaction including i a separation agreement ii a merger agreement iii transition services agreements iv an employee matters agreement v agreements regarding rights to intellectual_property and vi agreements regarding rights to certain facilities to be owned by controlled or distributing collectively the continuing agreements plr-132430-12 services under the transitional services agreements are expected to be provided at no less than cost and no more than fair_market_value except for payments with respect to transitional services payments made in connection with the other continuing agreements will be on terms intended to reflect those terms arrived at by parties negotiating at arm’s length the controlled indebtedness the controlled indebtedness i will have at least a d term to maturity and ii will not contain any call or put rights other than the re-financing call_right the controlled indebtedness will be obligations that will rank pari passu with all present and future obligations of controlled will not contain any provisions will bear an interest rate and the yield will be determined at the time the controlled indebtedness is priced the controlled indebtedness is expected to have a grade credit rating from credit rating agency a and credit rating agency b after the later of the acquiring merger or the debt exchange acquiring is expected to guarantee the controlled indebtedness at such time controlled also is expected to provide a cross-guarantee on acquiring’s outstanding third- party indebtedness acquiring’s guarantee is not expected to change the credit rating of the controlled indebtedness from grade the debt exchange for the purpose of effectuating the debt exchange in an efficient manner distributing anticipates issuing indebtedness ie the distributing notes directly to one or more commercial banks and or investment banks the financial institutions and subsequently exchanging the controlled indebtedness for such distributing indebtedness it is expected that any newly issued distributing notes to be exchanged will have a maturity_date of within e and f and will be prepayable without penalty while it is expected that the distributing indebtedness will be newly issued it is possible that in lieu of such newly issued indebtedness the financial institutions will purchase existing distributing indebtedness distributing indebtedness from current holders of such indebtedness in such event the term debt exchange defined in step l would incorporate any exchange of controlled indebtedness for such distributing indebtedness the amount of distributing notes or distributing indebtedness exchanged for controlled indebtedness in the debt exchange will not exceed the daily average outstanding third party indebtedness of distributing for the day period ending on the close of business on date the last full business_day before the date on which distributing’s board_of directors directed management to actively pursue the distribution of business c in the event the financial institutions i loan money directly to distributing for newly issued distributing notes or ii purchase existing distributing indebtedness they will acquire good and valid title to the distributing notes or distributing indebtedness at least g days prior to the date of the debt exchange plr-132430-12 it is possible that the financial institutions may sell all or a portion of the distributing notes or distributing indebtedness to a syndicate of securities underwriters the securities underwriters and collectively with the financial institutions the exchanging note holders prior to the execution of the exchange_agreement defined below distributing expects to enter into an exchange_agreement the exchange_agreement with the exchanging note holders for the exchange by such institutions of distributing notes or distributing indebtedness for the controlled indebtedness any such exchange_agreement would be executed no sooner than h days after the acquisition by the financial institutions of such distributing notes or distributing indebtedness and if distributing notes are newly issued no sooner than h days after the funds have been disbursed to distributing the pricing for the debt exchange will be determined pursuant to arm’s length negotiations and such negotiations are expected to take into account the margins that such exchanging note holders typically seek for an underwriting of instruments similar to the controlled indebtedness the exchanging note holders may enter into other agreements with respect to the distributing notes or distributing indebtedness but neither distributing nor any affiliate will be a party to such agreements the exchanging note holders are expected to solicit non-binding indications of interest for the controlled indebtedness they will receive in exchange for the distributing notes or distributing indebtedness from third-party investors prior to the execution of the exchange_agreement however i the exchanging note holders will not enter into a binding obligation to sell the controlled indebtedness and ii the sale to third party investors will not be executed in either case sooner than immediately after the execution of the exchange_agreement in addition no person will have any right or obligation to acquire any controlled indebtedness from distributing other than the exchanging note holders pursuant to and upon execution of the exchange_agreement pre-distribution stock repurchases all repurchases of distributing common_stock that occurred or will occur for the two year period before the distribution will have been open market transactions occurring in an amount and at a time that would have occurred regardless of the distribution the pre-distribution repurchases if taken into account for purposes of sec_355 the pre- distribution repurchases would cause the distribution to be treated as a distribution to which sec_355 applies and this fact has been specifically considered in issuing ruling acquiring special contraction prior to the acquiring merger acquiring is expected to i declare the special dividend ii effect the acquiring special share repurchase or iii effect a combination of the special plr-132430-12 dividend and acquiring special share repurchase in which the amount payable to the acquiring shareholders will not exceed i collectively with the acquiring special share repurchase and the special dividend or any combination thereof the acquiring special contraction if treated as occurring after the acquiring merger and taken into account for purposes of sec_355 the acquiring special contraction would cause the distribution to be treated as a distribution to which sec_355 applies and this fact has been specifically considered in issuing ruling acquiring stock public sale distributing savings_plan acquiring equity compensation plan and acquiring reinvestment plan as described above in the acquiring merger all of the controlled stock will be exchanged for acquiring stock including the controlled stock held by the agent if taken into account for purposes of sec_355 acquisitions of acquiring stock that would otherwise qualify under sec_1_355-7 but for the fact they are acquisitions of acquiring stock and not controlled stock such an acquisition an acquiring stock public sale would cause the distribution to be treated as a distribution to which sec_355 applies and this fact has been specifically considered in issuing ruling distributing has a sec_401 qualified_plan a savings_plan for the distributing group’s employees that qualifies as a sec_401 plan and a_trust one investment option available to distributing group employees who may self-direct investments through the savings_plan is participation in the distributing common_stock fund the fund pursuant to which such employees can invest in distributing common_stock the savings_plan currently holds in the aggregate on behalf of the distributing group employees as beneficiaries distributing common_stock representing less than j percent of the total value and voting power of the stock of distributing under the proposed transaction the savings_plan would receive shares of controlled stock on behalf of the fund participants and upon the acquiring merger such shares of controlled stock would convert to acquiring stock because acquiring stock would not be a permitted_investment of the fund under the savings_plan governing documents however the fund participants would be required to direct the divestment of such shares within k to l months if the fund participants fail to provide such direction within the required period the plan trustee would be required to direct the sale of such acquiring shares on behalf of the savings_plan such sale along with any sale as directed by a fund participant or otherwise a savings_plan sale any such sale would be contractually required to be effectuated in an open market transaction if the aggregation rule_of sec_355 were to apply for purposes of determining whether the savings_plan with respect to any sales of distributing common_stock or acquiring stock it makes actively participates in the management or operation of any corporation for purposes of the definition of controlling shareholder within the meaning of sec_1_355-7 such sales would cause the distribution to be treated as a distribution to which sec_355 applies if those sales were regarded as part plr-132430-12 of a plan including the distribution and this fact has been specifically considered in issuing ruling acquiring has an equity compensation plan the equity compensation plan which was neither established nor amended in contemplation of the distribution and which will continue after the acquiring merger all employees of acquiring including former employees of the distributing group who become employees of acquiring as a result of the acquiring merger as well as employees who may never have performed services for distributing or controlled will be eligible to participate in the equity compensation plan in addition as part of the acquiring merger distributing options and restricted_stock held by employees of the distributing group who become employees of acquiring will be converted into acquiring options and restricted_stock the option and restricted_stock conversion and any post-acquiring merger issuances with respect to the equity compensation plan or acquiring options or restricted_stock issued in the option and restricted_stock conversion equity compensation issuances if taken into account for purposes of sec_355 the option and restricted_stock conversion or the equity compensation issuances would cause the distribution to be treated as a distribution to which sec_355 applies and these facts have been specifically considered in issuing ruling acquiring also has a dividend_reinvestment_plan the reinvestment plan which will continue after the acquiring merger the reinvestment plan affords the shareholders of acquiring stock an election to reinvest their dividends in new shares of acquiring stock the issuance of such a new share a reinvestment share issuance all shareholders of acquiring stock following the acquiring merger will be eligible to participate in the reinvestment plan if taken into account for purposes of sec_355 any reinvestment share issuance would cause the distribution to be treated as a distribution to which sec_355 applies and this fact has been specifically considered in issuing ruling acquiring board_of directors in conjunction with the distribution m positions on the acquiring board_of directors will be filled with candidates nominated by acquiring’s nominating corporate governance committee such action the filling of the acquiring board member positions if taken into account for purposes of sec_355 the filling of the acquiring board member positions would cause the distribution to be treated as a distribution to which sec_355 applies and this fact has been specifically considered in issuing ruling representations the upstream mergers for purposes of these rulings transferor shall refer to the corporation transferring its the liabilities of transferor assumed within the meaning of sec_357 by the upstream_merger will be effected pursuant to the respective state laws plr-132430-12 assets in the merger the following representations have been made with respect to each of the upstream mergers a pursuant to the plan of merger and by operation of law the following will occur simultaneously i all of the assets and all of the liabilities of transferor at the effective time of the upstream_merger will become the assets and liabilities of distributing through its interests in the type b llc and ii the separate legal existence of transferor will cease to exist for all purposes b distributing has no plan or intention to sell transfer or otherwise dispose_of any of the assets of transferor including the indirect assets of sub or sub with regard to the sub merger and sub merger respectively acquired in the transaction except for i dispositions made in the ordinary course of business ii transfers described in sec_368 or sec_1_368-2 or iii the transactions that comprise the proposed transactions c distributing in the upstream_merger were i incurred by transferor in the ordinary course of its business and are associated with the assets to be transferred to distributing in such upstream_merger or ii incurred to facilitate the appropriate liquidity and capital structure for each of distributing and controlled d following the upstream_merger distributing will continue through one or more members of distributing’s qualified_group within the meaning of sec_1_368-1 the historic_business of transferor the historic_business of sub and sub respectively with regard to the sub1 merger and the sub3 merger respectively or use a significant portion of transferor’s historic assets the historic_business_assets of sub and sub respectively with regard to the sub1 merger and the sub3 merger respectively in a business e connection with the upstream_merger f distributing that was issued acquired or will be settled at a discount g sec_368 and iv h transferor will exceed the sum of the liabilities of transferor to be assumed by distributing through its interests in the type b llc within the meaning of sec_357 the fair_market_value of the assets of distributing will exceed the amount of its liabilities distributing and transferor will pay their respective expenses if any incurred in no two parties to the upstream_merger are investment companies as defined in the total fair_market_value of the assets to be transferred to distributing by there is no intercorporate indebtedness existing between transferor and plr-132430-12 immediately after the upstream_merger i within the meaning of sec_368 transferor is not under the jurisdiction of a court in a title_11_or_similar_case the sub contributions no stock_or_securities will be issued for services rendered to or for the benefit of any patents or patent applications that will be transferred in the sub distributing will not retain any rights in the property transferred to sub the proceeds received in collection of the income items will be included as the sub contributions are not the result of the solicitation by a promoter j sub in connection with the sub contributions and ii no stock_or_securities will be issued for indebtedness of sub that is not evidenced by a security or for interest on indebtedness of sub which accrued on or after the beginning of the holding_period of distributing for the debt k ordinary_income in computing the taxable_income of sub l contributions will qualify as property within the meaning of sec_351 of the code distributing will transfer all substantial rights in such patents or patent applications within the meaning of sec_1235 of the code see revrul_69_156 1969_1_cb_101 m broker or investment house n o the value of the stock deemed to be received in exchange for accounts_receivable will be equal to the net value of the accounts transferred ie the face_amount of the accounts_receivable previously included in income less the amount of the reserve for bad_debts p be equal to or exceed the sum of the liabilities to be assumed by sub within the meaning of sec_357 the liabilities to be assumed by sub within the meaning of sec_357 if any q were incurred by the entities in the ordinary course of business and are associated with the assets to be transferred r between sub and distributing and there will be no indebtedness created in favor of distributing as a result of the sub contributions s transaction in which the rights of the parties are defined the transfers and exchanges will occur under a plan agreed upon before the immediately before the sub contributions there will be no indebtedness the fair_market_value of the assets to be transferred by distributing to sub will all exchanges with respect to each sub contribution will occur on there is no plan or intention on the part of sub to redeem or otherwise plr-132430-12 t approximately the same date as the other exchanges with respect to such sub contribution u reacquire any stock or indebtedness to be deemed issued in the sub contributions v taking into account any issuance of additional shares of sub stock any issuance of stock for services the exercise of any sub stock_rights warrants or subscriptions a public offering of sub stock and the sale exchange transfer by gift or other_disposition of any of the stock of sub to be received in the exchange distributing will be in control of sub within the meaning of sec_368 w in a trade_or_business x other than in the normal course of business operations y in connection with the sub contributions z sec_1_351-1 aa within the meaning of sec_368 and no stock_or_securities of sub will be used to satisfy the indebtedness of distributing bb sub will not be an investment_company within the meaning of sec_351 and each of the parties to the transaction will pay its own expenses if any incurred sub will not be a personal_service_corporation within the meaning of sec_269a sub will remain in existence and retain and use the property transferred to it distributing is not under the jurisdiction of a court in a title_11_or_similar_case there is no plan or intention by sub to dispose_of the transferred property the contribution and distribution any indebtedness owed by controlled to distributing or any of its affiliates the following representations have been made regarding the contribution and the distribution cc after the debt exchange will not constitute stock_or_securities dd distributing shareholder in any exchange is intended to reflect the fair_market_value of the distributing stock to be surrendered by the distributing shareholder in such exchange the fair_market_value of the controlled stock to be received by each plr-132430-12 ee a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing no part of the consideration to be distributed by distributing will be received by following the distribution other than as provided in the continuing the years of financial information submitted on behalf of the distributing sag the years of financial information submitted on behalf of the controlled sag ff no part of the consideration to be distributed by distributing will be received by a security holder as an employee or in any capacity other than that of a security holder of the corporation gg is representative of business a's present operation and with regard to business a there have been no substantial operational changes since the date of the last financial statements submitted hh is representative of business c's present operation and with regard to business c there have been no substantial operational changes since the date of the last financial statement submitted ii agreements the distributing sag will continue the active_conduct of business a and the controlled sag will continue the active_conduct of business c independently and with their separate employees jj distribution is motivated in whole or substantial part by the corporate business purposes kk earnings_and_profits of distributing or controlled or both ll controlled by distributing in the contribution will exceed the sum of i the amount of liabilities if any assumed within the meaning of sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the exchange and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the exchange the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution mm any liabilities assumed within the meaning of sec_357 by controlled in the contribution were i incurred in the ordinary course of business and are associated with the distribution is being carried out for the corporate business purposes the the distribution is not used principally as a device for the distribution of the the total adjusted_basis and fair_market_value of the assets transferred to except with respect to intercompany settlements distributing neither the total fair_market_value of the assets transferred in the contribution will be plr-132430-12 the assets transferred to controlled in connection with the contribution or ii incurred to facilitate the appropriate liquidity and capital structure for each of distributing and controlled nn equal to or exceed the adjusted_basis of those assets oo the income_tax_liability for the taxable_year in which investment_credit_property including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect before amendment by public law title 104_stat_1388 if applicable to reflect an early disposition of the property pp accumulated its receivables nor made extraordinary payment of its payables in anticipation of the distribution and related transactions qq distributing and its affiliates and controlled and its affiliates a incurred in the ordinary course of business or b created pursuant to the continuing agreements no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution rr immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further distributing’s excess_loss_account if any with respect to the controlled stock will be included in income immediately before the distribution see sec_1_1502-19 ss sec_368 and iv other than i the controlled indebtedness and ii trade payables between no two parties to the transaction are investment companies as defined in for purposes of sec_355 immediately after the distribution no person tt determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution for purposes of sec_355 immediately after the distribution no person uu determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or treating i the aggregation rule_of sec_355 as not applying for plr-132430-12 percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution vv purposes of determining whether the savings_plan actively participates in the management or operation of any corporation for purposes of the definition of controlling shareholder within the meaning of sec_1_355-7 ii any acquisition of acquiring stock following the acquiring merger as if such acquiring stock were stock of controlled for purposes of sec_1_355-7 d d d and d and iii acquiring stock public sales fractional shares sales reinvestment share issuances equity compensation issuances the option restricted_stock conversion pre- distribution repurchases acquiring special contraction and the filling of the acquiring board member positions as not resulting in any acquisitions for purposes of sec_355 the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation the determination of whether a person is a five-percent shareholder or ten-percent shareholder is made solely by reference to the filings and actual knowledge for purposes of this letter a the filings are the latest schedules 13d or 13g filed with respect to the issuing company with the securities_and_exchange_commission on or prior to the date of the particular sale or disposition with respect to which it is being determined whether the seller or acquirer is a five-percent shareholder or ten-percent shareholder within the meaning of sec_1_355-7 and and b actual knowledge is with respect to any particular sale or disposition limited to actual knowledge of i those persons whose ownership of stock and or options is listed in a form_3 or 10-k filed by the issuing company with the securities_and_exchange_commission and ii with respect to the persons listed in i the ownership of such stock or options listed in the latest relevant form_3 or 10-k made on or prior to the date of such sale or disposition ww nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 xx the purpose of avoiding the expense and inconvenience to acquiring of issuing and maintaining fractional shares and will not represent separately bargained for consideration the total cash that will be paid in the transaction to any shareholder in lieu of a fractional share of acquiring stock will not exceed one percent of the total the payment of cash in lieu of a fractional share of acquiring stock is solely for immediately after the transaction as defined in sec_355 neither distributing plr-132430-12 consideration that will be distributed in the transaction any fractional share interests of any shareholder entitled to receive fractional shares will be aggregated and it is intended that no such shareholder will receive cash in an amount equal to or greater than the value of one full share of acquiring stock the acquiring merger the fair_market_value of the acquiring stock received by each controlled yy the acquiring merger will be effected pursuant to the laws of state a pursuant to the plan of merger by operation of law the following will occur simultaneously i all of the assets and all of the liabilities of merger sub at the effective time of the acquiring merger will become the assets and liabilities of controlled and ii the separate legal existence of merger sub will cease to exist for all purposes zz shareholder in the acquiring merger will be intended to be approximately equal to the fair_market_value of the controlled stock surrendered in the exchange thereof aaa following the acquiring merger controlled will hold at least percent of the fair_market_value of its net assets and at least percent of the fair_market_value of its gross assets held immediately prior to the acquiring merger and at least percent of the fair_market_value of merger sub’s net assets and at least percent of the fair_market_value of merger sub’s gross assets held immediately prior to the acquiring merger for purposes of this representation amounts paid_by controlled or merger sub to dissenters amounts paid_by controlled or merger sub to shareholders who receive cash or other_property amounts used by controlled or merger sub to pay reorganization expenses and all redemptions and distributions except for regular normal dividends made by controlled will be included as assets of controlled or merger sub respectively immediately prior to the acquiring merger bbb prior to the acquiring merger acquiring will be in control of merger sub within the meaning of sec_368 ccc controlled has no plan or intention to issue additional shares of its stock that would result in acquiring losing control of controlled within the meaning of sec_368 ddd neither acquiring nor any person related to acquiring within the meaning of sec_1_368-1 has any plan or intention directly or through any subsidiary_corporation to purchase any of acquiring stock issued in the acquiring merger eee acquiring has no plan or intention to liquidate controlled to merge controlled with or into another corporation to sell or otherwise dispose_of the stock of controlled or to cause controlled to sell or otherwise dispose_of any of its assets or of any of the assets acquired from merger sub except for i dispositions made in the ordinary course of business or ii transfers described in sec_368 or sec_1_368-2 there is no intercorporate indebtedness existing between controlled and in the acquiring merger shares of controlled stock representing control of the liabilities of merger sub assumed by controlled and the liabilities to which plr-132430-12 fff the transferred assets of merger sub are subject were incurred by merger sub in the ordinary course of its business ggg following the acquiring merger acquiring will continue through one or more members of acquiring’s qualified_group within the meaning of sec_1_368-1 the historic_business of controlled or use a significant portion of controlled’s historic assets in a business hhh acquiring merger sub controlled and the shareholders of controlled will pay their respective expenses if any incurred in connection with the acquiring merger iii acquiring or between merger sub and controlled that was issued acquired or will be settled at a discount jjj controlled as defined in sec_368 will be exchanged solely_for_voting_stock of acquiring for purposes of this representation shares of controlled exchanged for cash or other_property originating with acquiring will be treated as outstanding controlled stock on the date of the acquiring merger kkk at the time of the acquiring merger controlled will not have outstanding any warrants options convertible securities restricted_stock or any other type of right pursuant to which any person could acquire stock in controlled that if exercised or converted would affect acquiring’s acquisition or retention of control of controlled as defined in sec_368 lll of the stock of controlled mmm no two parties to the acquiring merger are investment companies as defined in sec_368 and iv nnn at the time of the acquiring merger the total fair_market_value of the assets of controlled will exceed the sum of its liabilities plus the liabilities if any to which the assets are subject the fair_market_value of the assets of acquiring will exceed the amount of its liabilities immediately after the acquiring merger ooo controlled is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 acquiring does not own nor has it owned during the past five years any shares rulings plr-132430-12 based solely on the information submitted and the representations set forth above we rule as follows regarding the proposed transaction the upstream mergers distributing will recognize no gain_or_loss on its receipt of the assets of transferor each of the upstream mergers will qualify as a reorganization under transferor will recognize no gain_or_loss on the deemed_distribution of for purposes of these rulings transferor shall refer to the corporation transferring its assets in the merger sec_368 and transferor and distributing will each be a_party_to_a_reorganization under sec_368 transferor will recognize no gain_or_loss on the transfer of its assets to distributing in exchange for the deemed issuance of distributing stock and the assumption by distributing of liabilities of transferor in each upstream_merger sec_357 and sec_361 in actual or constructive exchange for distributing stock in each upstream_merger sec_1032 distributing stock in each upstream_merger sec_361 stock in exchange for its stock in transferor in each upstream_merger sec_354 distributing’s basis in each asset received in each of the upstream mergers will equal the basis of the asset in the hands of each transferor immediately prior to such upstream_merger sec_362 upstream_merger will include the period during which that asset was held by the transferor sec_1223 date of each upstream_merger the items of each transferor described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 transferor will be eliminated without the recognition of gain as a result of the respective upstream_merger sec_1_1502-19 distributing’s holding_period in each asset received from each transferor in each distributing will succeed to and take into account as of the close of the effective the excess_loss_account if any of distributing with respect to the stock of each distributing will recognize no gain_or_loss on the deemed receipt of distributing plr-132430-12 the sub contributions except as provided in sec_357 distributing will recognize no gain_or_loss in the sub contributions sec_351 and sec_357 sub will recognize no gain_or_loss in the sub contributions sec_1032 the aggregate basis of the sub membership interests held by distributing shall be increased by the aggregate basis of the contributed assets allocated between the different classes if any of sub stock held by distributing in proportion to the relative fair market values of the classes and decreased by the amount of liabilities other than liabilities described in sec_357 assumed by sub in the sub contributions and such increased or decreased basis shall not be separately tracked within any share sec_358 and d sub 9’s basis in each asset received from distributing in the sub contributions will equal the basis of each such asset in the hands of distributing immediately before its contribution to sub increased by the amount of gain if any recognized by distributing pursuant to sec_357 in the sub contributions sec_362 distributing’s holding_period in the sub membership interests deemed received by distributing in the sub contributions will include the holding_period of property contributed by distributing provided such property is held by distributing as a capital_asset on the date of the sub contributions sec_1223 sub 9’s holding_period in each asset received from distributing in the sub contributions will include the period during which distributing held such asset sec_1223 the contribution and the distribution the contribution and the distribution together will be a reorganization within the meaning of sec_368 distributing and controlled will each be a party to the reorganization within the meaning of sec_368 no gain_or_loss will be recognized by distributing on the contribution except to the extent of any gain recognized under sec_357 with respect to any excess of liabilities assumed by controlled over the adjusted_basis of the assets contributed to controlled sec_357 and sec_361 no gain_or_loss will be recognized by controlled on the contribution sec_1032 plr-132430-12 controlled’s basis in each asset received in the contribution will be the same as the basis of that asset in the hands of distributing immediately before its transfer increased by the amount of gain if any recognized by distributing pursuant to sec_357 on the transfer sec_362 controlled’s holding_period in each asset received in the contribution will include the period during which distributing held the asset sec_1223 no gain_or_loss will be recognized by distributing on the distribution and no gain_or_loss will be recognized by distributing on the debt exchange sec_361 provided that the controlled indebtedness is transferred in the debt exchange in connection with the proposed transactions as described above then under the intercompany_transaction regulations distributing will not recognize any income gain loss or deduction with respect to the controlled indebtedness on the receipt or transfer of the controlled indebtedness other than any i deductions attributable to the fact that distributing notes or distributing indebtedness may be redeemed at a premium ii income attributable to the fact that distributing notes or distributing indebtedness may be redeemed at a discount and iii interest_expense accrued with respect to distributing notes or distributing indebtedness sec_1_1502-13 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the distributing shareholders upon their receipt of the controlled stock in the distribution sec_355 distributing common_stock as adjusted under sec_1_358-1 will be allocated between the share of distributing common_stock with respect to which the spin-off is made and the controlled stock or allocable portions thereof received in the spin-off with respect to the share of distributing common_stock in proportion to their fair market values distributing shareholder in the exchange including any fractional share interest in a share of controlled stock to which the shareholder may be entitled will be the same as the shareholder’s basis in the distributing stock surrendered in exchange therefor in the exchange allocated in the manner described in sec_1_358-2 sec_358 in a share of distributing common_stock as adjusted under sec_1_358-1 will be allocated between the share of distributing common_stock with respect to which the subsequent distribution is made and the share of controlled stock or allocable portions thereof received in the subsequent distribution with respect to the share of distributing common_stock in proportion to their fair market values in the event of an exchange the basis of the controlled stock received by each in the event of a subsequent distribution each distributing shareholder’s basis in the event of the spin-off each distributing shareholder’s basis in a share of plr-132430-12 each distributing shareholder’s holding_period in the controlled stock received will include the holding_period of the distributing common_stock with respect to which the distribution of the controlled stock is made provided that the distributing common_stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits if any will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1_1502-33 a distributing shareholder that receives cash in lieu of a fractional share of controlled stock will recognize gain_or_loss measured by the difference between the basis of the fractional share received as determined above in rulings and with respect to the spin-off or subsequent distribution if any respectively and in ruling with respect to an exchange if any and the amount of cash received sec_1001 any gain_or_loss will be treated as capital_gain or loss provided the fractional share of stock is held as a capital_asset on the date of the distribution sec_1221 and sec_1222 controlled will not be a successor to distributing for purposes of sec_1504 therefore controlled and its direct and indirect subsidiaries that are includible corporations under sec_1504 and satisfy the ownership requirements of sec_1504 will be members of an affiliated_group_of_corporations entitled to file a consolidated federal_income_tax return with controlled as the common parent and following the acquiring merger with acquiring as the common parent pursuant to ruling distributing’s basis in its shares of controlled stock at the time of the distribution will be determined under sec_1_1502-19 by allocating basis first to equalize and eliminate any excess_loss_account with respect to any share of controlled stock except for purposes of sec_355 any post-distribution payments made by distributing or any of its affiliates to controlled or any of its affiliates or vice versa that i have arisen or will arise with respect to a taxable_period ending on or before the distribution or for a taxable_period beginning on or before and ending after the distribution and ii will not have become fixed and ascertainable until after the distribution will be treated as occurring immediately before the distribution in addition any type a contribution that is delayed until after the distribution will be treated as occurring immediately before the distribution see 344_us_6 revrul_83_73 1983_1_cb_84 the acquiring merger the acquisition by acquiring of all the controlled stock in exchange solely for shares of acquiring stock in the acquiring merger will qualify as a reorganization under sec_368 the reorganization will not be disqualified because voting_stock of acquiring is used in the merger sec_368 controlled and acquiring will each be a_party_to_a_reorganization under sec_368 plr-132430-12 acquiring will recognize no gain_or_loss upon the receipt of controlled stock in exchange solely for acquiring stock in the acquiring merger sec_1032 the acquiring merger will constitute a reverse_acquisition within the meaning of sec_1_1502-75 for purposes of sec_1_1502-31 and sec_1_1502-33 the acquiring merger will qualify as a group structure change sec_1_1502-33 acquiring’s holding_period in the stock of controlled will include the period during which acquiring held the stock of merger sub sec_1223 a controlled shareholder will not recognize gain_or_loss in the acquiring merger on the exchange of controlled stock solely for acquiring stock including any fractional share interest to which the shareholder would be entitled sec_354 a controlled shareholder’s basis in the acquiring stock received in the acquiring merger including any fractional share interest to which the shareholder would be entitled will equal the basis of the controlled common_stock exchanged therefor sec_358 a controlled shareholder’s holding_period in the stock of acquiring will include the period during which the shareholder held the stock of controlled exchanged therefor provided the controlled stock is a capital_asset in the controlled shareholder’s hands on the date of the exchange sec_1223 a shareholder that receives cash in lieu of a fractional share of acquiring stock will recognize gain_or_loss measured by the difference between the basis of the fractional share received and the amount of cash received sec_1001 any gain_or_loss will be treated as capital_gain or loss provided the fractional share of stock is held as a capital_asset on the date of the merger sec_1221 and sec_1222 caveats we express no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that is not specifically covered by the above rulings in particular we express no opinion regarding i whether the distribution satisfies the business_purpose requirement of sec_1 b plr-132430-12 ii whether the distribution is being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both see sec_355 and sec_1_355-2 iii whether any distribution described above and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 procedural statements this ruling letter is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter must be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the transactions described herein are completed alternatively a taxpayer filing its return electronically may satisfy this requirement by attaching a statement to its federal_income_tax return that sets forth the date and control number of this ruling under a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely gerald b fleming senior technician reviewer branch office of associate chief_counsel corporate cc


internal_revenue_service number release date index number --------------------------------------- -------------------------------------------------------------- ------------------------ --------------------------- - department of the treasury washington dc person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 - plr-170050-03 date march ------------------------------------------------ legend taxpayer ------------------------------------------------------------------------ date state dear -------------- ------------------ ---------- this letter responds to a letter dated date and subsequent correspondence requesting a ruling under sec_301_9100-3 of the procedure and administration regulations to file an election for taxpayer to be treated as a corporation for federal tax purposes effective date facts according to the information submitted taxpayer is the parent company of an affiliated_group_of_corporations filing a consolidated_return taxpayer was formed on date as a general_partnership under the laws of state at all times it was taxpayer's intent to be taxed as a corporation for federal tax purposes corporation by filing a form_8832 entity classification election and provided taxpayer with a partially completed form to execute and instructions to mail it to the philadelphia service_center however through inadvertence the form_8832 was never filed with the internal_revenue_service taxpayer's outside counsel advised taxpayer to elect to be taxed as a plr-170050-03 law and application pursuant to sec_301_7701-3 a domestic eligible_entity may elect to be sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership generally a domestic eligible_entity with two or more members is a partnership unless the entity elects to be treated otherwise sec_301_7701-3 classified other than as provided under sec_301_7701-3 by filing a form_8832 with the designated service_center an election under sec_301_7701-3 may be effective on the date specified on the form_8832 or on the date filed if no date is specified on the form the effective date on the form_8832 cannot be more than days prior to the date on which the election is filed extension of time for making certain elections sec_301_9100-3 provides that an extension of time to file certain elections will be granted if the taxpayer is able to establish that it acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-1 permits the commissioner to grant a reasonable conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted an extension of time of days from the date of this letter to file a form_8832 electing to be taxed as a corporation the form_8832 is to be filed with the philadelphia internal_revenue_service center with an effective date of date a copy of this letter should be attached to the election a copy is enclosed for this purpose plr-170050-03 except for the specific ruling above no opinion is expressed or implied concerning the federal_income_tax consequences of the facts of this case under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 pursuant to a power_of_attorney on file with this office a copy of this letter is provides that this ruling may not be used or cited as precedent being sent to your requested tax representative sincerely s heather c maloy associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc ---------------------------------- ------------------------------------------------------------------------------------------------------------ -------------------------------------------- ---------------------------------- ------------------------ ------------------------ ------------------------ -------------------------- ---------------- -------------------------------------- -------------------------------------------------- -------------------------------


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc psi b04 - plr - date date number release date index no re legend father mother trust trustees llc date date date date date date date date date trust trust trust plr - trust son son son son state state court state state court x y z state statute state statute - - dear this is in response to the date letter submitted by your authorized representative on your behalf and subsequent correspondence concerning the generation-skipping_transfer gst tax status of trusts the facts and representations submitted are summarized as follows father died testate on date prior to date under article second of his will dated date father created trust for the lifetime benefit of his wife mother article second of father’s will also granted mother a limited testamentary_power_of_appointment over trust mother died testate on date also prior to date under article sixth of her will dated date mother exercised the limited testamentary_power_of_appointment over trust by dividing trust into four equal portions with each separate portion to be held for the benefit of son son son and son respectively and their families each portion is to be held for the benefit of each son his wife or widow and his issue until the later of the death of the son or the death of his widow income is to be paid to such person or persons belonging to a class composed of the son for whom such portion is named and the wife widow and issue of such son in the trustees’ absolute discretion upon the death of each son or the death of his widow the son’s portion is to be paid to the son’s issue in equal shares per stirpes plr - article seventh of mother’s will provides in part that the trustees shall have the power authority and discretion to sell convey and exchange at such times and on such terms and conditions as to credit or otherwise and in such manner as they may think proper any and all stocks bonds mortgages mortgage certificates voting_trust_certificates and other personal_property of said trust fund and to reinvest the proceeds of sale and any other funds which may come into their hands as trustees in such stocks bonds mortgages mortgage certificates voting_trust_certificates and other_property as they may think proper whether or not such investments are authorized by law as proper investments for trust funds son survived his wife and died on date accordingly son 4's portion was distributed outright to son 4's issue the portions established for son are still in existence trustees are currently serving as the co-trustees through a single federal_income_tax return was filed for trust the trustees subsequently determined that the portions should have been treated for all purposes as separate trusts the original situs of trust was state on or about date trustees agreed to secure office space in state for the purpose of conducting operations and administration trustees have filed a complaint in state court and received an order from state court on date providing the following declaratory relief state court has jurisdiction over trusts trusts are separate and distinct trusts designated as trust trust and trust the terms of trusts do not violate state law state conflicts of laws rules call for the continued application of state law to matters of construction of the terms of trusts the change_of situs of trusts does not violate state law the situs of trusts is state and state law will apply to questions of administration of trusts on date trustees petitioned state court to order that the situs of trusts be moved from state to state trust was irrevocable on date it is represented that no actual or constructive additions have been made to trust or to trusts after that date on date trustees established llc a state limited_liability_company trusts are the sole members of llc and trustees are the managers of llc trusts contributed substantially_all of each trust’s assets to llc as capital contributions and each trust received an identical interest in llc it is represented that trustees are permitted to invest trust assets in llc by virtue of their broad investment authority as plr - provided in trusts and state law and therefore the trustees did not request court approval with respect to the investment in llc article a of the llc operating_agreement provides in part that each year the managers shall distribute cash to the equity_interest owners trusts in proportion to their respective membership interests in an amount equal to the greater of i x percent of the fair_market_value of the llc’s assets or ii the net_income of the llc calculated in accordance with the state uniform principal and income act and determined as if the llc were a_trust additional distributions of cash or other_property are permitted provided that in any one year the managers shall not make additional distributions of cash to the trusts if such cash distributions would be treated as income under the state uniform principal and income act additionally the managers may distribute cash to each member in an amount equal to such member’s capital_gain taxes attributable to capital_gain realized by the llc however article d of the llc operating_agreement provides as follows t he trustees of trust may only make distributions in excess of the net_income of the llc calculated in accordance with the state uniform principal and income act and determined as if the llc were a_trust to the son of father and mother for whom the trust was named his wife his widow and those issue of the son who would receive a share of the trust property if the survivor of the son of father and mother for whom the trust was named and his widow were to die on the date of the distribution and the remainder were to be distributed to the issue of such son in equal shares per stirpes and not per capita article b of the llc operating_agreement provides in part that distributions of cash or other_property shall be made to the equity_interest owners in proportion to their respective membership interests managers have the discretion subject_to the manager’s fiduciary duty to determine whether cash or other_property shall be distributed and the timing of such distributions article of the llc operating_agreement provides that each member of the llc may withdraw cumulatively during each five year period from time to time up to dollar_figurey of such member’s membership interest in the llc provided however that the minimum amount that may be withdrawn at any one time shall be dollar_figurez and that the value of the member’s interest in the llc is greater than the requested withdrawal amount to the extent that the withdrawal made under article is not treated as a distribution of principal under state uniform principal and income act such distribution shall be made in_kind and not in cash you have requested the following ruling requests plr - trusts are wholly exempt from the gst tax under section b a of the change_of the situs from state to state will not cause trusts to lose the tax_reform_act_of_1986 their exempt status the ruling of state court confirming that there are three separate and distinct trusts will not cause trusts to lose their gst exempt status the trustees’ proposed investment of substantially_all of the assets of trusts in llc will not cause trusts to lose their exempt status because the proposed investment will not shift a beneficial_interest in any of the trusts and the trustees’ proposed investment of substantially_all of the assets of trusts in llc will not cause any portion of any of the trusts to be treated as if it had been added to the trusts after date ruling sec_2601 imposes a tax on each generation-skipping_transfer made by a transferor to a skip_person with respect to the transferor of the property under sec_2652 the transferor of the property for gst tax purposes is the last person with respect to whom the property was subject_to estate or gift_tax under section a of the tax_reform_act_of_1986 the gst tax is generally applicable to generation-skipping transfers made after date however under section b a of the tax reform act and sec_26_2601-1 of the regulations the tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date see sec_26_2601-1 regarding constructive_addition in this case trust was established prior to date and the separate portions that became trusts were established pursuant to mother’s exercise of a testamentary limited_power_of_appointment effective on date mother’s date of death also prior to date it is represented that there have been no additions either actual or constructive to trusts after date accordingly we conclude that trusts are exempt from gst tax under section b a of the tax_reform_act_of_1986 ruling sec_2 - sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a modification will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial plr - interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a generation-skipping_transfer or the creation of a new generation-skipping_transfer a modification that is administrative in nature that only indirectly increases the amount transferred will not be considered to shift a beneficial_interest in the trust sec_26_2601-1 example involves a_trust that is irrevocable on or before date in grantor who was domiciled in state x executed an irrevocable_trust for the benefit of grantor’s issue naming a state x bank as trustee under the terms of the trust the trust is to terminate in all events no later than years after the death of the last to die of certain designated individuals living at the time the trust was executed in state y bank replaced state x bank as sole trustee the effect of changing trustees is that the situs of the trust changes to state y and the laws of state y govern the administration and construction of the trust state y law contains no rule_against_perpetuities in view of the terms of the trust instrument the trust will terminate at the same time before and after the change in situs accordingly the change in situs does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficiary interest prior to the transfer furthermore the change in situs does not extend the time for vesting of any beneficial_interest in the trust beyond that provided for in the original trust therefore the trust will not be subject_to the provisions of chapter sec_26_2601-1 example involves a_trust that is irrevocable on or before date the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a's issue and one for the benefit of b and b's issue the trust terms are identical except for the beneficiaries the division of the trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the division in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the two partitioned trusts resulting from the division will not be subject_to the provisions of chapter sec_26_2601-1 example considers a situation where a_trust that is otherwise exempt from the gst tax provides that trust income is payable to a for life and upon a's death the remainder is to pass to a's issue per stirpes in the appropriate local court approves a modification to the trust that converts a's income_interest into the right to receive the greater of the entire income of the trust or a fixed percentage of the trust assets valued annually unitrust_interest to be paid each year to a for life the example concludes that the modification does not result in a shift in plr - beneficial_interest to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification rather the modification can only operate to increase the amount distributable to a and decrease the amount distributable to a's issue in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust will not be subject_to the provisions of chapter state statute provides that a fiduciary may acquire and retain every kind of property real personal or mixed and every kind of investment which persons of prudence discretion and intelligence acquire or retain for their own account state statute provides that a trustee shall allocate to income money received from an entity state statute further provides that an entity includes a limited_liability corporation in this case the court order confirming that the separate portions that became trusts are separate trusts and the change_of situs of trusts will not result in a shift of any beneficial_interest in the trusts to any beneficiary who occupies a generation lower than the persons holding the beneficial interests prior to the division or change in situs further the division and change in situs will not extend the time for vesting of any beneficial_interest in the trusts beyond the period provided for in the original trust accordingly based on the facts submitted and the representations made we conclude that the court order confirming that the separate portions that became trusts are separate trusts one trust for the benefit of son and his family_trust one trust for the benefit of son and his family_trust and one trust for the benefit of son and his family_trust and the change_of situs from state to state will not cause trusts to lose exempt status for gst tax purposes under sec_2601 in addition we conclude that the investment of substantially_all of the assets of trusts in llc as described above will not shift any beneficial interests in trust to lower generation beneficiaries and the investment will not cause any portion of any of the trusts to be treated as an addition to trusts after date accordingly the investment of substantially_all of the assets of trusts in llc will not cause the trusts to lose gst tax exempt status 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 plr - referenced in this letter this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely george l masnik branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-168322-02 date date company properties state town a b c d e f plr-168322-02 dear this letter responds to your letter dated date as well as subsequent correspondence submitted on behalf of company requesting a ruling that the rental income received by company from the properties is not passive_investment_income within the meaning of sec_1362 of the internal_revenue_code facts company was incorporated under the laws of state in a and intends to elect under sec_1362 to be an s_corporation effective b company owns leases and manages commercial real_estate the properties from on-site offices it has c full-time employees in two locations in town through these employees as well as independent contractors company provides various services in its real_estate leasing and management business these services include common area maintenance maintenance and repair of building exteriors including roofs maintenance and repair of parking lots fire system inspection and maintenance lawn maintenance trash removal snow removal pest control construction of tenant improvements tenant service calls security services and office services such as copying faxing package receiving notary services and conference room rental in addition to the services provided to tenants company handles the usual leasing and administrative functions involved in managing rental real_estate company received or accrued approximately d in rents and paid_or_incurred approximately e in relevant expenses for f on the properties law and analysis except as provided in sec_1362 sec_1362 provides that a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 terminates whenever the corporation i has accumulated_earnings_and_profits at the close of each of three consecutive tax years and ii has gross_receipts for each of such tax years more than percent of which are passive_investment_income except as otherwise provided in sec_1362 sec_1362 provides that the term passive_investment_income means gross_receipts derived from royalties rents dividends interest annuities and sales or exchanges of stock_or_securities sec_1_1362-2 of the income_tax regulations provides that rents means amounts received for_the_use_of or the right to use property whether real or personal of the corporation sec_1_1362-2 provides that rents does not include rents derived in the active trade_or_business of renting property rents received by a corporation are derived in an active trade_or_business of renting property only if based plr-168322-02 on all the facts and circumstances the corporation provides significant services or incurs substantial costs in the rental business generally significant services are not rendered and substantial costs are not incurred in connection with net leases whether significant services are performed or substantial costs are incurred in the rental business is determined based upon all the facts and circumstances including the number of persons employed to provide the services and the types and amounts of costs and expenses_incurred other than depreciation conclusion based solely on the facts and representations submitted we conclude that the rents company receives from the properties are not passive_investment_income under sec_1362 except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding company's eligibility to elect to be treated as an s_corporation further the passive_investment_income rules of sec_1362 are completely independent of the passive_activity rules of sec_469 unless an exception under sec_469 applies the rental_activity remains passive for purposes of sec_469 under a power_of_attorney on file with this office we are sending copies of this letter to your authorized representatives this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent sincerely mary beth collins senior technician reviewer branch office of associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes