internal_revenue_service number release date index number ----------------------- -------------------------------- -------------------- ------------------------------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------------ telephone number ---------------------- refer reply to cc fip plr-132611-16 date date legend taxpayer state month a date b year individual cpa external business administrator ---------------------------- ----------------------------------------------- --------------------- ---------------- ------------------- ------- ----------------------- ------------------- dear ---------- this letter is in response to taxpayer’s request pursuant to sec_301_9100-3 of the procedure and administration regulations for an extension of time to make the election under sec_831 of the internal_revenue_code facts taxpayer was formed as a corporation in month a of year under the laws of state and was licensed as an insurance_company in state external business administrator was engaged to assist with the formation of a captive_insurance_company taxpayer and to provide administrative services individual is an officer of taxpayer taxpayer engaged cpa to prepare tax returns and provide accounting services based upon discussions with cpa and external business administrator individual approved the decision to make an election under sec_831 for taxpayer’s first tax_year ending on date b of year individual directed cpa to make the election cpa indicated that he would make such election in a timely fashion in connection with the preparation of taxpayer’s initial return plr-132611-16 taxpayer filed a timely request for an extension of time to file its form 1120-pc u s property and casualty income_tax return for the tax_year ending on date b of year pursuant to this extension taxpayer timely filed its initial tax_return for the tax_year ending on date b of year cpa inadvertently omitted the sec_831 election statement from the originally filed return upon learning of the error cpa prepared an amended_return differing from the original return only by the attachment of the election statement taxpayer then submitted the amended_return and the letter_ruling requesting relief pursuant to sec_301_9100-3 taxpayer represents that upon granting of the requested extension taxpayer will not have a lower tax_liability in the aggregate for all taxable years affected by the election than taxpayer would have had if the election had been timely filed taking into account the time_value_of_money further taxpayer represents that it requested relief before the failure to make the election was discovered by the internal_revenue_service taxpayer represents that it qualifies as a property and casualty insurance_company under part ii of subchapter_l of the internal_revenue_code ruling requested taxpayer requests a ruling that in accordance with sec_301_9100-1 and sec_301_9100-3 taxpayer be granted a reasonable period of time to make the election under sec_831 for the taxable_year ending on date b of year law and analysis sec_831 provides that taxes computed as provided in sec_11 are imposed for each taxable_year on the taxable_income of every insurance_company other than a life_insurance_company however sec_831 allows certain small companies to elect to be subject_to tax on their taxable_investment_income only the election applies to the taxable_year for which the company made it and as long as the company continues to qualify for all subsequent taxable years unless revoked with the consent of the secretary the time and manner to make the sec_831 election is prescribed by sec_301_9100-8 accordingly the election under sec_831 is a regulatory election sec_301_9100-1 pursuant to sec_301_9100-8 the election is to be made by the due_date taking into account any extensions of time to file obtained by the taxpayer of the tax_return for the first taxable_year for which the election is effective by attaching a statement to the tax_return containing the information specified in sec_301_9100-8 plr-132611-16 under sec_301_9100-1 the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory or statutory election sec_301_9100-2 does not provide relief for a taxpayer to make an election under sec_831 for any of the years for which relief is sought sec_301_9100-3 provides that a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government under sec_301_9100-3 a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the internal_revenue_service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief the commissioner will grant a reasonable extension of time to make a regulatory election only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 plr-132611-16 the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 sec_301_9100-1 cautions that granting an extension of time to make the election is not a determination that the taxpayer is otherwise eligible to make the election based solely on taxpayer’s representations and the additional information required under sec_301_9100-3 taxpayer qualifies for an extension of time to make the election under sec_831 taxpayer is deemed to have acted in good_faith as defined by sec_301_9100-3 and the grant of relief will not prejudice the interests of the government ruling accordingly under sec_301_9100-3 taxpayer is granted an extension of time of days following the date of this letter to make the election provided by sec_831 for the tax_year ending on date b of year the election should be made in a written_statement filed with the appropriate service_center a copy of this letter should be attached to the sec_831 election caveats the ruling contained in this letter is based upon the information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the ruling_request and it is subject_to verification on examination except as provided above no opinion is expressed or implied concerning the federal_income_tax consequences of any other aspect of this or other transactions or item_of_income of taxpayer specifically no ruling is made as to whether taxpayer qualifies as an insurance_company under sec_831 and the granting of the extension under sec_301_9100-1 should not be construed as a determination that taxpayer is eligible to make the election provided by sec_831 this ruling is directed only to the taxpayer that requested it sec_6110 provides that this ruling may not be used or cited as precedent plr-132611-16 in accordance with a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely alexis a macivor branch chief branch office of the associate chief_counsel financial institutions products


internal_revenue_service number release date index number --------------------- -------------------------------- --------------------------------------- ------------------------------------------------ -------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------------ telephone number ------------------- refer reply to cc corp plr-102718-14 date date legend purchaser ------------------------------------------------------------ ---------------------------------------------------------------------- --------------------------------------- target ------------------------------------------------------------ ---------------------------------------------------------------------- --------------------------- sellers date a state a -------------------------------------------------------- ---------------------- -------------- company official --------------------------------------------------------------------------- ------------------------------------------------------- tax professional --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------- dear ------------------- this letter responds to a letter dated date submitted on behalf of purchaser and sellers requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election purchaser and sellers are requesting an extension to file a sec_338 election under sec_338 and sec_338 of the internal_revenue_code and sec_1_338_h_10_-1 of the income_tax regulations plr-102718-14 with respect to purchaser's acquisition of the stock of target sometimes hereinafter referred to as the election on date a additional information was received in subsequent letters the material information is summarized below purchaser is a state a corporation and the common parent of its consolidated_group target was a corporation that prior to its acquisition by purchaser was treated as an s_corporation within the meaning of sec_1361 all the stock of target was owned either directly or through a revocable_trust meeting the requirements of sec_1361 by sellers individuals on date a purchaser acquired all of the stock of target in a fully taxable transaction pursuant to a stock purchase and exchange_agreement the taxpayers have represented that purchaser's acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 the taxpayers have also represented that all relevant returns have been filed consistent with making the election additionally the taxpayers have represented that they do not seek to alter a return position for which an accuracy-related tax penalty has been or could be imposed under sec_6662 at the time the parties requested relief and the new position requires or permits a regulatory election for which relief is requested after the due_date for the election it was discovered that a valid election had not been properly filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase sec_1_338_h_10_-1 permits the purchasing_corporation and sellers of an s_corporation to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the proceeds in complete_liquidation a sec_338 election may be made for target only if purchaser acquires stock meeting the requirements of sec_1504 from a selling_consolidated_group a selling affiliate or the s_corporation shareholders in a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when plr-102718-14 the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338_h_10_-1 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for purchaser and sellers to file the election provided purchaser and sellers show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser sellers company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that purchaser reasonably relied on a qualified_tax professional who failed to make or advise purchaser to make the election and that the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations made we conclude that purchaser and sellers have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for purchaser and sellers to file the election with respect to the acquisition of the stock of target as described above within days of the date on this letter purchaser and sellers must file the election on form_8023 in accordance with sec_1_338_h_10_-1 and the instructions to the form a copy of this letter must be attached to form_8023 within days of the date on this letter purchaser and sellers having filed their returns as though a valid election was made must amend their returns to attach to the returns a copy of this letter alternatively taxpayers filing their returns electronically may satisfy the requirement of attaching a copy of this letter by attaching a statement to their return that provides the date and control number of the letter_ruling the above extension of time is conditioned on the taxpayers' purchaser's consolidated_group sellers' and target's tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the applicable director's office upon audit of the federal_income_tax returns involved plr-102718-14 we express no opinion as to whether the acquisition sale of the target stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target stock qualifies for sec_338 treatment or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by purchaser sellers company official and tax professional however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely ken cohen acting chief branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index no p o box ben franklin station washington dc person to contact telephone number refer reply to cc dom p si - plr-116107-99 date date re legend r family_trust decedent spouse dollar_figurex state date dear this is in response to your letter of date and subsequent correspondence requesting an extension of time under sec_301_9100-1 of the procedure and administration regulations to sever a marital trust trust b into a gst exempt trust and a gst nonexempt trust and to make a reverse qualified_terminable_interest_property qtip_election under sec_2652 of the internal_revenue_code with respect to the exempt gst_trust in decedent and spouse established a revocable_trust the r family_trust at that time decedent and spouse transferred their community_property and separate_property to the r family_trust when decedent died on date survived by spouse and four children all of his property both real and personal passed to the r family_trust under the terms of his will spouse is the executrix of decedent’s estate and successor trustee of the r family_trust under the terms of the r family_trust upon the decedent’s death the decedent’s assets were divided into two trusts trust b and trust c trust b and trust c are to consist of the decedent’s share of the couple’s community_property as well as the decedent’s separate_property trust b is to be funded with an amount equal to the maximum marital_deduction allowable for the decedent’s estate reduced by the value of all other_property interests includible in the estate of the decedent that otherwise qualified for the marital_deduction and the amount that will result in no federal estate_tax after allowing for the unified_credit and the credit for state death the balance of decedent’s assets passed to trust c trust b was intended to be a qualified_terminable_interest_property qtip_trust within the meaning of sec_2056 the terms of the r family_trust specifically authorized the successor trustee to make the sec_2056 election qtip_election to qualify trust b for the federal estate_tax_marital_deduction the trust agreement also authorized the executrix to sever trust b into a generation-skipping_transfer gst exempt trust and a gst nonexempt trust and to make the election under sec_2652 reverse_qtip_election with respect to the exempt trust during spouse’s life spouse is to receive all of the net_income of trust b payable at least monthly upon the death of spouse in accordance with spouse’s testamentary special_power_of_appointment the assets of trust b are to be distributed to or for the benefit of decedent’s children or their wives the trustee shall pay or apply as much of trust c net_income and principal to or for the benefit of spouse during her lifetime as the trustee deems necessary for her proper health support maintenance and education upon the death of spouse trust c shall be distributed in trust for the benefit of decedent’s children decedent's_estate filed a federal estate_tax_return on date on schedule m of the decedent's_estate tax_return the estate made an election to treat all of trust b as qtip under sec_2056 trust b was valued at dollar_figurex on the estate_tax_return the estate’s attorney however failed to sever trust b as authorized under the terms of the r family_trust into a gst exempt trust and a gst nonexempt trust prior to the time prescribed for filing the decedent’s estate_tax_return the estate’s attorney also failed to file a schedule r with the estate_tax_return on which the sec_2652 reverse_qtip_election with respect to the exempt trust b is to be signified on date spouse as executrix of decedent’s estate filed with the internal_revenue_service an amended estate_tax_return containing a schedule r on which spouse reported the severance of trust b into two trusts a gst exempt trust and a gst nonexempt trust spouse also unequivocally signified that the election under sec_2652 was being made with respect to the exempt trust b sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides that in the case of qualified_terminable_interest_property the property shall be treated as passing to the surviving_spouse for purposes of sec_2056 and no part of the property shall be treated as passing to any person other than the surviving_spouse sec_2056 defines qualified_terminable_interest_property as property which passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which an election under sec_2056 applies sec_2601 imposes a tax on every generation-skipping_transfer with regard to the generation-skipping_transfer_tax gstt each individual is allowed an exemption of dollar_figure which may be allocated by such individual or by his or her executor to any property with respect to which such individual is the transferor under sec_2632 the allocation may be made at any time on or before the date prescribed for filing the individual's estate_tax_return including extensions sec_2652 provides that in the case of any trust with respect to which a deduction is allowed to the decedent under sec_2056 the estate of the decedent may elect to treat all of the property in the trust for purposes of the gstt chapter as if the election to be treated as qualified_terminable_interest_property had not been made this election is referred to as the reverse_qtip_election the consequence of a reverse_qtip_election is that the decedent remains for gstt purposes the transferor of the qtip_trust for which the election is made as a result the decedent's gst_exemption may be allocated to the qtip_trust sec_26_2654-1 of the generation-skipping_transfer_tax regulations provides that in general the severance of a_trust that is included in the transferor’s gross_estate into two or more trusts is recognized for gstt purposes if the governing instrument does not require or otherwise direct severance but the trust is severed pursuant to discretionary authority granted either under the governing instrument or under local law and the severance occurs prior to the date prescribed for filing the federal estate_tax_return including extensions actually granted for the estate of the transferor in accordance with sec_301_9100-1 of the procedure and administration regulations sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections under sec_301_9100-3 requests for extensions of time for regulatory elections that do not meet the requirements for an automatic_extension of time under sec_301_9100-2 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of government sec_301_9100-3 provides that in general a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied upon a qualified_tax professional to make the election and the tax professional failed to make or advise the taxpayer to make the election in this case the requirements of sec_301_9100-1 and sec_301_9100-3 have been met consequently an extension of time for severing trust b pursuant to sec_26_2654-1 into a gst exempt trust and a gst nonexempt trust and an extension of time for making the reverse_qtip_election under sec_2652 with respect to the exempt trust b is granted until days after the date of this letter we note that the extension of time to make the reverse_qtip_election under sec_2652 does not extend the time to make an allocation of any remaining gst_exemption consequently in this case decedent’s remaining gstt exemption is allocated under the deemed_allocation rules to the exempt trust b the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as we have specifically ruled herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be forwarded to the service_center where the election was filed a copy is enclosed for that purpose sincerely yours paul f kugler assistant chief_counsel passthroughs and special industries enclosures copy for sec_6110 purpose copy of letter


internal_revenue_service number release date index number -------------------------- ----------- ------------------ --------------------- ------------------------ - department of the treasury washington dc person to contact ------------------------ ---------------------- telephone number ------------------- refer reply to cc intl br5 - plr-112485-04 date date ---------------------------------------- ----------------------------------------------------- ------------ ------ ------ ----------- ------ ---------------------- -------------------------- ---------------------------- ----- -------------------------------------------- ------------------ legend target ---------------------------------------------------------------- -------------------------------------------------------- acquirer ----------------------------------------------------------------- ------------------------------------------------ business a country a year year state a year date us sub x fx -------------------------------------------------------------- y z aa bb cc date date dear ----------------- --------------- ---------------- ---------------- -------------- ---------------- ------------------- --------------------- plr-112485-04 this is in response to your letter dated date requesting a private_letter_ruling that based on your representations the proposed merger of a wholly owned domestic subsidiary of acquirer a foreign_corporation with and into target a domestic_corporation will qualify for an exception to the general_rule of sec_367 of the internal_revenue_code_of_1986 as amended the code additional information was submitted in letters dated date date date date and date 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 acquirer is engaged in business a acquirer is a publicly traded company which has a non-us government as its indirect majority shareholder acquirer was incorporated in year in country a and began operations in year target is engaged in the same business as acquirer target is a publicly traded company which has one class of stock issued and outstanding target was incorporated in state a in year on date acquirer and target entered into an agreement whereby us sub a wholly owned domestic subsidiary of acquirer will merge with and into target with target surviving the merger the merger holders of target stock in exchange for their target shares will receive american depository shares ads in acquirer acquirer and target represent that the merger will qualify as a reorganization within the meaning of sec_368 of the code the exchange of target shares by u s persons is subject_to sec_367 of the code which provides that where no exception applies the transfer of appreciated_property including stock by a u_s_person to a foreign_corporation in a transaction that would otherwise qualify as a reorganization_exchange is treated as a taxable transfer in the case of a sec_367 transaction in which a u_s_person transfers stock to a foreign_corporation the u s transferor will qualify for nonrecognition treatment only if the requirements of sec_1_367_a_-3 are satisfied among the requirements of sec_1_367_a_-3 is the requirement that the u s target company must satisfy the reporting requirements of sec_1_367_a_-3 target represents that it will comply with the reporting requirements of sec_1_367_a_-3 additionally a transfer by a u s transferor that is a five-percent shareholder of the transferee foreign_corporation immediately_after_the_transfer will only qualify for the exception in sec_1_367_a_-3 if the transferor enters into a five-year gain_recognition_agreement as provided in sec_1_367_a_-8 among the remaining requirements under sec_1_367_a_-3 is the requirement that u s persons transferring u s target stock must receive in the aggregate percent or less of both the total voting power and total value of the stock in the transferee foreign_corporation taking into account the attribution_rules under sec_318 of the code as modified plr-112485-04 by the rules of sec_958 of the code the taxpayers represent that u s transferors of target stock will receive in the aggregate actually or constructively 50-percent or less of both the total voting power and total value of all shares of acquirer stock outstanding after the merger another requirement is that u s persons who are officers or directors of the u s target_corporation or who are 5-percent shareholders of the u s target_corporation must own in the aggregate 50-percent or less of each of the total voting power and total value of the stock in the transferee foreign_corporation taking into account the attribution_rules of sec_318 of the code as modified by the rules of sec_958 of the code the taxpayers represent that u s persons who are officers directors or 5-percent target shareholders as defined in sec_1_367_a_-3 of target will own in the aggregate actually or constructively percent or less of each of the total voting power and total value of all shares of acquirer immediately after the merger the active trade_or_business test of sec_1_367_a_-3 must be satisfied the active trade_or_business test consists of three elements the first element provides that the transferee foreign_corporation or any qualified_subsidiary or qualified_partnership as defined under sec_1_367_a_-3 and viii must have been engaged in the active_conduct_of_a_trade_or_business outside of the united_states within the meaning of sec_1_367_a_-2t b and for the entire 36-month period immediately preceding the exchange of u s target stock acquirer represents that it or one or more of its qualified subsidiaries as defined in sec_1_367_a_-3 will have been engaged in the active_conduct_of_a_trade_or_business outside the united_states the acquiring business within the meaning of sec_1_367_a_-2t b and for the entire 36-month period immediately preceding the merger the second element of the active trade_or_business test provides that at the time of the exchange neither the transferors nor the transferee foreign_corporation or any qualified_subsidiary or qualified_partnership engaged in the active trade_or_business will have the intention to substantially dispose_of or discontinue such trade_or_business target represents that at the time of the merger no shareholders of target to the knowledge of target have any intention to substantially dispose_of or discontinue the acquiring business acquiring represents that at the time of the merger acquiring including its qualified subsidiaries does not have any intention to substantially dispose_of or discontinue the acquiring business the third element of the active trade_or_business test is the substantiality test as defined in sec_1_367_a_-3 under the substantiality test the transferee foreign_corporation must be equal to or greater in value than the u s target_corporation at the time of the u s target stock exchange see sec_1_367_a_-3 pursuant to sec_1_367_a_-3 the value of the transferee foreign_corporation is reduced by the amount of any asset acquired outside the ordinary course of business by such corporation or any of its qualified subsidiaries or qualified partnerships within the 36-month period preceding the exchange to the extent that i at the time of the exchange such asset produces or is held for the production of passive_income as defined in sec_1297 or ii such asset was acquired for the principal purpose of satisfying the substantiality test commonly referred to as the stuffing rule in addition pursuant to sec_1_367_a_-3 the value of plr-112485-04 the transferee foreign_corporation is reduced by the value of assets received within the 36-month period prior to the acquisition if such assets were owned by the u s target company or an affiliate acquirer represents that it did not undertake any debt issuance acquisition merger or restructuring with the months preceding the merger for any purpose related to satisfying the substantiality test during the months preceding the merger acquirer i purchased x of the stock of fx a foreign_corporation and that ownership_interest in fx is worth dollar_figurey ii issued dollar_figurez worth of convertible notes iii issued dollar_figureaa worth of ordinary shares and iv and the employees of acquirer exercised compensatory options for acquirer ordinary shares worth dollar_figurebb fx is engaged in the same business as acquirer and is treated as an integrated element of acquirer’s business and not a passive investment acquirer purchased the fx shares in the ordinary course of business in order to expand its global presence in business a during the prior 36-month period acquirer’s capital expenditures exceeded its cash_flow from operations by dollar_figurecc acquirer’s issuances of equity and convertible notes were necessary to fund acquirer’s net capital expenditures plus its working_capital requirements and other commitments during the most recent months and for acquirer to maintain enough capital to fund future expenditures and or acquisitions acquirer issued convertible notes which are convertible to acquirer ordinary shares subject_to certain limitations the convertible notes were out-of-the-money when issued have been out-of- the-money at all times since issuance and are currently out-of-the-money none of the convertible notes have been converted to equity acquirer also represents that as a result of the merger none of acquirer’s currently outstanding debt will be required to be converted it is further represented that the compensatory options both currently outstanding and those exercised between date and date were issued to acquirer’s employees for valid business reasons and in the ordinary course of business based solely on the information submitted and on the representations set forth above and provided the convertible notes constitute debt not equity and subject_to the caveats below it is held as follows the transfer of target shares by us persons who are not 5-percent transferee shareholders as defined in sec_1_367_a_-3 for ads of acquiring will qualify for an exception to sec_367 under sec_1_367_a_-3 and any u_s_person transferring target shares who is a 5-percent transferee shareholder as defined in sec_1_367_a_-3 will qualify for the exception to sec_367 only upon entering into a 5-year gain_recognition_agreement pursuant to sec_1_367_a_-8 plr-112485-04 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular no opinion was requested and no opinion is expressed as to whether the merger qualifies as a reorganization within the meaning of sec_368 sec_368 and sec_368 of the code no opinion is expressed as to the reporting requirements of u s persons exchanging stock under sec_6038b and the regulations thereunder this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent it is important that a copy of this letter be attached to the federal_income_tax return of the taxpayer involved for the taxable_year in which the transaction covered by this ruling is consummated in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely michael h frankel senior technical reviewer branch office of associate chief_counsel international


internal_revenue_service number release date index number -------------------------------------- ------------------------------------------- ------------------------------------------------------------ ------------------------------------------ ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no -------------------- --------------------------------------------------- telephone number --------------------- refer reply to cc fip b02 plr-129931-15 date date parent --------------------------------------------------- ------------------------------------------------ sub --------------------------------------------------- ------------------------------------------------------- sub --------------------------------------------------- ------------------------------------------------------ manager advisor advisor advisor lp trust date date date ------------------------------------------------------ ------------------- --------------------- --------- ---------------------------------------- ------------------------------------ ------------------------- --------------------------- ----------------------- plr-129931-15 date date date date state state p --------------------- --------------------- ---------------------- -------------------------- ------------- ------------- -------- dear ----------- this is in reply to a letter dated date submitted by your authorized representative requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations for parent sub and sub jointly to make elections under sec_856 of the internal_revenue_code code to treat sub and sub as taxable real_estate_investment_trust subsidiaries trss of parent facts parent was organized on date as a corporation under the laws of state on or before date parent filed a form 1120-reit for the taxable_year ended date on which it elected to be treated as a real_estate_investment_trust reit for federal tax purposes parent owns an approximate p of the interests in lp a limited_partnership lp owns all of the interests in trust trust intends to qualify as a real_estate_mortgage_investment_conduit remic under sec_860d of the code trust owns all of the interest in sub a limited_liability_company formed on date under the laws of state sub has filed form_8832 entity classification election electing to be treated as a corporation for federal_income_tax purposes lp also owns all of the interest in sub which was formed on date sub has filed form_8832 entity classification election electing to be treated as a corporation for federal_income_tax purposes parent sub and sub have no employees their business affairs are externally managed by manager manager engages advisor for advice on tax and plr-129931-15 legal matters manager has also engaged advisor for entities within the lp organization structure including those involved in the transaction described below manager has also engaged advisor to provide tax compliance and consulting services to parent and sub on date subsidiaries of an affiliate of lp acquired residential whole loans from unrelated parties lp split the loans into two pools a performing pool and a nonperforming pool the nonperforming pool was acquired by sub it was intended that sub qualify as a trs to avoid possible adverse tax consequences the performing pool was put into trust a remic and the remic residual_interest was put into sub it was intended that sub would also elect to be a trs although advisor and advisor advised manager on the planning of the acquisition of the whole loans on the formation of trust as a remic and on the division of the interests in the loans among the parties these parties failed to coordinate to ensure that a form_8875 taxable_reit_subsidiary election was timely prepared and filed for sub and sub when the failure_to_file the forms was discovered manager engaged advisor on date to prepare requests for extensions of time to file the forms the following representations are made in connection with the request for an extension of time the request for relief was filed before the failure to make the regulatory election was discovered by the internal_revenue_service granting the relief requested will not result in parent sub and sub having a lower tax_liability in the aggregate for all years to which the elections apply than they would have had if the elections had been timely made taking into account the time_value_of_money parent sub and sub do not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 of the code at the time they requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences parent sub and sub did not choose to not file the election parent sub and sub are not using hindsight in making the decision to seek the relief requested no specific facts have changed since the due_date for making the elections that make the elections advantageous to the taxpayers plr-129931-15 in addition affidavits on behalf of parent sub and sub have been provided as required by sec_301_9100-3 of the procedure and administration regulations law and analysis sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a trs to be eligible for treatment as a trs sec_856 provides that the reit must directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary in announcement 2001_1_cb_716 the service announced the availability of new form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for taxable years beginning after for eligible entities to elect treatment as a trs the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the taxable_year however the effective date of the election depends on when the form_8875 is filed the instruction further provide that the effective date cannot be more than months and days prior to the date of filing the election or more than months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service sec_301_9100-1 of the procedure and administration regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by regulations or by a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 through c sets forth rules that the service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the service ii failed to plr-129931-15 make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election moreover a taxpayer will be deemed not to have acted in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion based upon the facts and representations submitted we conclude that parent sub and sub have shown good cause for granting a reasonable extension of time to elect under sec_856 to treat sub and sub as trss of parent the extension of time to make the election i sec_90 days from the date of this letter this ruling is limited to the timeliness of the filing of forms this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether parent otherwise qualifies as a reit or whether sub and sub otherwise qualify as trss under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of parent sub and sub is not lower in the aggregate for all years to which the elections apply than such tax_liability would have been if the elections had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns plr-129931-15 involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect except as specifically provided otherwise no opinion is expressed on the federal_income_tax consequences of the transactions described above this ruling is directed only to the taxpayers that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office copies of this letter are being sent to your authorized representatives sincerely susan thompson baker senior technician reviewer branch office of the associate chief_counsel financial institutions and products


internal_revenue_service department of the treasury index number number release date washington dc person to contact telephone number refer reply to cc dom p si 1-plr-109771-00 date date legend x date this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on date the sole shareholder of x desired that x elect s_corporation treatment for x effective on date but the election to be treated as an s_corporation was not timely filed accordingly x requests a ruling that it will be treated as an s_corporation effective date law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply plr-109771-00 x did not file an election to be treated as an s_corporation under sec_1362 x has however established reasonable_cause for not making a timely s election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and the representations made and provided that x otherwise qualifies as an s_corporation we conclude that x will be treated as an s_corporation effective date within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative signed dianna k miosi sincerely chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


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 b02 plr-144044-13 date date internal_revenue_service number release date index number --------------------- -------------------------- ----------------------------------------------------- -------------------------------------- ------------------------- ---------------------------- in re --------------------------------------------------- ------------------------------------------------------------ ----- ------------------------------------- legend parent ----------------------------------------------------------------------------- --------------------------------------------------------------------- -------------------------------------------------------- bank ----------------------------------------------------------------------------- --------------------------------------------------------------------- ------------------------------------------- agency date date date date date x agency tax professional ----------------------------------------------------- ---------------------------- -------------------------- ---------------------------- -------------------- ------------------- -- ------------------------------- plr-144044-13 dear ------------ ------------------------------------------------------------------------ ------------------------------------------------------------------------ -------------------------------------------- this letter responds to a letter dated date submitted by agency as agent of the consolidated_group of which parent is the common parent the parent group requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election in particular agency is requesting an extension of time for the parent group to elect an extended carryback period the election for a consolidated_net_operating_loss cnol the material information submitted for consideration is summarized below parent is the common parent of the parent group of which bank is a member on date bank was closed and agency was appointed receiver on date pursuant to sec_301_6402-7 agency was authorized by the internal_revenue_service to act as an agent of the carryback_year group the loss_year group or any other group of which bank is a member for any matter pertaining to the determination of the refund or tentative_carryback_adjustment for the carryback and loss years of the parent group the parent group incurred a cnol in the taxable_year ending date the year cnol agency on behalf of the parent group seeks to carry back the year cnol x years to the parent group’s taxable_year ending on date under sec_172 of the internal_revenue_code the parent group was required to file the election in order to carry back the year cnol to its taxable_year ending on date and to obtain the benefit of sec_56 the election was due on date but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election agency has represented that the parent group is not seeking to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 sec_172 generally permits a taxpayer to carry back a net_operating_loss nol to each of the taxable years preceding the taxable_year of the nol sec_172 permits a taxpayer to elect to carry back an applicable net_operating_loss applicable nol to each of the or taxable years preceding the taxable_year of the applicable nol in lieu of the 2-year period provided by sec_172 sec_172 provides that an applicable nol is the plr-144044-13 taxpayer’s nol for a taxable_year ending after date and beginning before date sec_172 provides that the election under sec_172 shall be made by the due_date including extension of time for filing the return for the taxpayer’s last taxable_year beginning in the election is irrevocable and in general may be made only with respect to one taxable_year sec_1502 provides that the secretary shall prescribe such regulations as he may deem necessary in order that the tax_liability of any affiliated_group_of_corporations making a consolidated_return and of each corporation in the group both during and after the period of affiliation may be returned determined computed assessed collected and adjusted in such manner as clearly to reflect the income_tax_liability and the various factors necessary for the determination of such liability and in order to prevent avoidance of such tax_liability in carrying out the preceding sentence the secretary may prescribe rules that are different from the provisions of chapter that would apply if such corporations filed separate returns sec_1_1502-21 of the income_tax regulations provides that losses taken into account in determining a cnol may be carried to other taxable years whether consolidated or separate only under paragraph b of sec_1_1502-21 sec_1_1502-21 provides that nol carryovers and carrybacks to a taxable_year are determined under the principles of sec_172 and sec_1_1502-21 sec_1_1502-21t provides that a consolidated_group may elect an extended carryback period pursuant to sec_172 with regard to a cnol arising in a taxable_year ending after date and beginning before date revproc_2009_52 2009_49_irb_744 provides when and how a taxpayer may make an election under sec_172 sec_4 of revproc_2009_52 provides that the common parent of a consolidated_group makes the election for the group sec_4 and of revproc_2009_52 permit the election to be made for consolidated taxpayers by attaching a statement to the original or amended consolidated_return for the taxable_year of the applicable cnol by attaching a statement to the taxpayer’s amended consolidated_return applying the applicable cnol to the carryback_year or by attaching a statement to a claim for a tentative_carryback_adjustment on form_1139 corporation application_for tentative refund sec_4 b and b of revproc_2009_52 require the election regardless of the manner in which made to be filed no later than the due_date including extensions for filing the return for the taxpayer’s last taxable_year beginning in plr-144044-13 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 the election by a consolidated_group to extend the carryback period under sec_172 for a cnol is a regulatory election therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for the parent group to file the election provided the parent group establishes to the satisfaction of the commissioner that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by agency and agency tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that the request for relief was filed before the failure to timely make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the affidavits submitted and the representations made we conclude that the parent group acted reasonably and in good_faith that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and that granting relief will not prejudice the interests of the government accordingly provided that and to the extent that the parent group qualifies substantively to file the election we grant an extension of time under sec_301_9100-3 until sixty days from the date on this letter for the parent group to file the election this letter does not extend the period of time described in sec_6511 by which a taxpayer is required to file a claim for credit or refund of an overpayment_of_tax the parent group may file the election under sec_172 to carry back the year cnol to its taxable_year ending on date on form 1120x amended u s_corporation income_tax return for the taxable_year ending either date or date according to the procedures set forth in revproc_2009_52 a copy of this letter must be attached to the form 1120x if the parent group files form 1120x electronically the parent group may satisfy the requirement of attaching a copy of this letter by attaching plr-144044-13 a statement to the parent group’s amended_return that provides the date and control number plr-144044-13 of this letter_ruling the above extension of time is conditioned on the parent group’s tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money we express no opinion as to the parent group’s tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the income_tax returns involved except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any item discussed or referenced in this letter in particular we express no opinion with respect to whether the parent group qualifies substantively to make the election in addition we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the internal_revenue_code or regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in this letter for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made under penalty of perjury by agency and agency tax professional the director however should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable continue to apply this letter_ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely ken cohen acting chief branch office of associate chief_counsel corporate


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp br 06-plr-155970-01 date date legend distributing controlled busine sec_1 busine sec_2 date date date date year year year year year state a a b c d plr-155970-01 e f g h i j k l m n o p q r s t u v w x y z aa plr-155970-01 bb person person person person person person person person person person person person person person a b c d e f g h plr-155970-01 n o dear this letter is in reply to your letters dated date date date and date requesting rulings as to the federal_income_tax consequences of a proposed transaction distributing was formed on date1 distributing incorporated controlled under the laws of state a distributing elected to be treated as an s_corporation effective as of date distributing does not join in the filing of a consolidated federal_income_tax return on or about date distributing incorporated controlled under the laws of state a controlled will immediately elect to be treated as a qualified_subchapter_s_subsidiary qsub of distributing the authorized capital stock of distributing consists of a shares of voting common_stock each share entitles the shareholder to one vote there are no dividend or liquidation preferences the percentage of voting common_stock owned by each shareholder of distributing prior to the distribution is as follows person b person c person b person d person d person d person as custodian for person e person as custodian for person f person as custodian for person g person as custodian for person f person as custodian for person h person d person as custodian for person i person as custodian for person g the authorized capital stock of controlled will consist of a shares of voting common_stock there will be no dividend or liquidation preferences distributing will own all of the a shares of controlled voting_stock since date distributing has primarily been engaged in busine sec_1 including without limitation a b and c currently distributing owns j separate a b and c’s distributing has received gross rents in the amount of k l m n and o in year year year year and year respectively its total rental expenses for each of the last five years have been p in year q in year r in year s in year and t in year distributing is also engaged in the operation of busine sec_2 during year its gross_sales were u but after all expenses were incurred its total income from operations amounted to v in year its gross_sales were w but after expenses its total income from operations was only x it is anticipated that busine sec_2 will be closed in the near future but it may in existence at the time of the split off none of the plr-155970-01 assets of busine sec_2 will be distributed to controlled or be a part of its operations following the split off if busine sec_2 is in existence after the split off its operations will remain unchanged the day to day management of n’s currently owned by distributing is performed exclusively by person person 12’s duties include d e f and g any substantial decisions however such as h must be approved by person 12's father person who is the president of distributing and one of three directors of distributing person is not an officer or a member of the board_of directors of distributing distributing currently has approximately y employees who perform operational duties with respect to h including o distributing has not issued any securities or bonds or any other outstanding interests other than two loans payable to person and person which as of date were in the amounts of z and aa respectively it is not anticipated that these loans will be satisfied prior to the time of the split off it is anticipated that prior to the split off distributing will obtain a loan of approximately bb secured_by one of the n’s which will be transferred by distributing to controlled in the transaction after the transaction controlled will assume this loan from distributing the net_proceeds from the financing would be retained by distributing for working_capital and to pay off existing debt including the debt owed by distributing to person the transaction between distributing and its shareholders will be as follows immediately after distributing forms controlled controlled will make an election to be treated as a qsub distributing will transfer eight pieces of n to controlled distributing will remain maker and guarantor on loans with regard to three of these n’s distributing will distribute all of the stock of controlled to person person as custodian for person person as custodian for person solely in exchange for all their stock in distributing the distribution the distribution will cause the termination of the qsub election of controlled because controlled will cease to be a subsidiary of distributing as a result under sec_1_1361-5 controlled will be treated as a new corporation acquiring all its assets and assuming all of its liabilities immediately before the distribution from distributing in exchange for stock of controlled the contribution following the contribution and distribution person person as custodian for person person as custodian for person will be the sole shareholders of controlled and person person person person person person person as custodian for person person as custodian for person person as custodian for person person as custodian for person and person as custodian for person will be the shareholders of distributing both controlled and distributing will then engage in busine sec_1 in substantially the same manner as distributing has conducted such operations for the past five years plr-155970-01 notwithstanding any situation whereby distributing might remain the maker or guarantor of loans made on n which will be contributed to controlled controlled will be obligated to reimburse distributing for such amounts after the split off controlled will be exclusively engaged in busine sec_1 including without limitation a b and c following the split off person will be the exclusive manager of the day to day operations of controlled his duties will include d e f and g person will have the unrestricted ability to purchase or dispose_of n it is expected controlled will employ a number of employees to perform administrative operational duties such as bookeeping and accounting the business_purpose for the distribution is that the separation of busine sec_1 will enhance the success of busine sec_1 by enabling distributing and controlled to resolve management systemic and other operational problems that have substantially deadlocked distributing under the current business structure distributing and controlled submit that all of n even those acquired within the past five years are part of one integrated business and that the transfer of n to controlled will constitute a vertical division of such single active business the following representations have been made in connection with the proposed transaction a b c d the indebtedness owed by the controlled_corporation to the distributing_corporation after the distribution of the controlled_corporation stock will not constitute stock_or_securities the fair_market_value of the controlled_corporation stock and other consideration to be received by each shareholder of the distributing_corporation will be approximately equal to the fair_market_value of the distributing_corporation stock no part of the consideration to be distributed by the distributing_corporation will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation the five years of financial information submitted on behalf of the distributing_corporation is representative of the corporation’s present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted e following the transaction the distributing and controlled corporations will each continue independently and with its separate employees the active_conduct of its share of all the integrated activities of the business conducted by distributing prior to the consummation of the transaction f the distribution of stock of controlled is carried out for the following plr-155970-01 corporate business_purpose to resolve between the shareholders of distributing the management and operational differences that have inhibited the growth and prosperity of distributing g distributing is currently an s_corporation within the meaning of sec_1361 controlled will elect to be an s_corporation pursuant to sec_1362 on the first available date after the distribution and there is no plan or intent to revoke or otherwise terminate the s_corporation_election of either distributing or controlled h i j k l m n o p there is no plan or intention by the shareholders or security holders of distributing to sell exchange transfer by gift or otherwise dispose_of any of their stock in or securities of either distributing or controlled after the transaction there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b there is no plan to either liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except in the ordinary course of business the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing equals or exceeds the sum of the liabilities assumed by controlled plus any liabilities to which the transferred assets are subject the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of its transaction no intercorporate debt will exist between the distributing_corporation and the controlled_corporation at the time of or subsequent to the distribution of the controlled_corporation stock payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the transaction are investment companies as defined in section in sec_368 and iv plr-155970-01 q r s t for purposes of sec_355 immediately after the distribution no person 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 distribution date for purposes of sec_355 immediately after the distribution no person 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 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 distribution date 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 section d ending on the distribution date the distribution is not part of a plan or series of related transactions within the meaning of sec_355 pursuant to which one or more persons will acquire directly or indirectly stock possessing fifty percent or more of the total combined voting power of all classes of distributing or controlled common_stock entitled to vote or percent or more of the total value of shares of all classes of distributing or controlled common_stock the loans on n contributed by distributing to controlled are recourse_liabilities controlled has agreed to and will satisfy such recourse_liabilities whether or not distributing has been released of such recourse_liabilities based solely on the information submitted and on the representations set forth above we hold as follows the distribution will cause the termination of the qsub election of controlled because controlled will cease to be a wholly owned subsidiary of distributing as a result controlled will be treated as a new corporation acquiring all of its assets and assuming all of its liabilities immediately before the distribution from distributing in exchange for stock of controlled the ‘contribution’ sec_1_1361-5 the contribution followed by the distribution of controlled stock by distributing to certain distributing shareholders will constitute a reorganization under sec_368 distributing and controlled each will be a ‘party to a reorganization’ under sec_368 no gain_or_loss will be recognized by distributing on the contribution section plr-155970-01 a no gain_or_loss will be recognized by controlled on the contribution sec_1032 the basis of each asset deemed received by controlled in the contribution will equal the basis of that asset in the hands of distributing sec_362 the holding_period of each asset deemed received by controlled will include the holding_period of that asset in the hands of distributing sec_1223 no gain_or_loss will be recognized by distributing on the distribution of the stock of controlled to the shareholders of distributing sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the shareholders of distributing on their receipt of controlled stock in the distribution sec_355 the basis of the controlled stock in the hands of distributing’s shareholders who exchange all of their distributing stock for shares of controlled common_stock will be the same as the basis in the distributing stock surrendered in exchange therefor sec_358 the holding_period of the controlled stock received by the transferors will include the holding_period of the distributing stock on which the distribution is made provided the stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not directly covered by the above rulings this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax return of the taxpayer involved for the taxable_year in which the transaction covered by this ruling letter is consummated the rulings contained in this letter are predicated upon the facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of the audit plr-155970-01 process pursuant to the power_of_attorney on file in this office a copy of this letter has been sent to your authorized representative cc sincerely yours steven j hankin senior technician reviewer branch office of assistant chief_counsel corporate


department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date cc psi b01 genin-129385-10 o f f i c e o f t h e c h i e f c o u n s e l number release date uil ---------- ----------------------- ------------------ ----------------------------------- dear ------------ this letter responds to your request for information dated date generally the rules for the classification of an entity for federal tax purposes are set forth in income_tax regulations sec_301_7701-3 in addition the instructions for form_8832 provide a summary of the entity classification rules and the procedure for making an entity classification election the classification of an entity establishes the entity’s filing and reporting requirements for federal tax purposes this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling see revproc_2010_1 sec_2 2010_1_irb_7 date if you have any additional questions please contact our office at --------------------- sincerely cornelia j schnyder senior technician reviewer branch associate chief_counsel passthroughs special industries