internal_revenue_service number release date index numbers ------------------------------ ---------------------------------------- ------------------------------- ------------------------------------- ----------------------- -------------------------------------- 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 b04 plr-145256-12 date april legend distributing ----------------------- ------------------------------------------------------------ --------------------------------- distributing ---------------------------------------------- ------------------------ -------------------------------------------------------------------- distributing ------------------------------------------------------------ -------------------------------------------------------------------- ------------------------------------- distributing ------------------------------------------------------------ -------------------------------------------------------------------- ------------------------------------------ controlled ----------------------------- ------------------------ --------------------------------------------------------------------------------------------- controlled ------------------------- ------------------------------------------------------------ -------------------------------------------------------------------- plr-145256-12 controlled ------------------------------------------------------------ -------------------------------------------------------------------- ----------------------------- sub ------------------------------------------------------------ -------------------------------------------------------------------- ------------------------------------------- sub ------------------------------------------------------------ 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------------------------------------------------------------ --------------------------------------------------------------- -------------------------------- sub ------------------------------------------------------------ ------------------------------------------------------- ------------------------------------------------- plr-145256-12 dre ------------------------------------------------------------ ------------------------------------------------------------------------------------- ------------------------------------------------ dre ------------------------------------------------------------ --------------------------------------------------------------------------------------------- ---------------------------------------------- dre ------------------------------------------------------------ --------------------------------------------------------------------------------- --------------------------------------------- dre ------------------------------------------------------------ --------------------------------------------------------------------------------- ---------------------------------- dre ------------------------------------------------------------ ------------------------------------------------------------------------------------- --------------------------------- dre ------------------------------------------------------------ ------------------------------------------------------------------------------------- ------------------------------------------- dre ------------------------------------------------------------ --------------------------------------------------------------------------------- ---------------------------------------------- busine sec_1 busine sec_2 state a state b state c country a date entity -------------------------- ---------------------- -------------- --------- -------------- ------------ -------------------------- ------------------------------------- plr-145256-12 a b c d e f g h i j k l m n o p q r s t u v ---- ---------------------------- -- -------------------------- ------ -------- -------- -------- ---------------- ---------------- ---- ------ ------ ------ -------- ---------------- ---------------- ---- -- ---- ---- ---- plr-145256-12 w x y ---- -- ---- dear -------------------- this letter responds to your letter dated date submitted by your authorized representatives requesting rulings on certain federal_income_tax consequences of a proposed transaction described below the information submitted in that request and in subsequent 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 an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover this office has not verified any information pertaining to and has made no determination regarding whether the internal distributions defined in step xxiii and the external distribution defined in step xxxiv i satisfy the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii are used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or any controlled_corporation or both see sec_355 and sec_1_355-2 and iii are part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in any distributing_corporation or any controlled_corporation see sec_355 and sec_1_355-7 facts distributing is a publicly traded corporation and the parent of a worldwide group of entities the distributing worldwide group distributing is also the common parent of an affiliated_group_of_corporations filing a consolidated federal_income_tax return the distributing consolidated_group distributing has a single class of stock outstanding the distributing common_stock distributing also has outstanding various share-based compensatory arrangements including stock_options restricted_stock units and performance-based shares distributing owns all of the equity of the following entities distributing sub sub and sub all entities are classified as corporations for federal_income_tax purposes unless otherwise noted plr-145256-12 sub owns all of the equity of sub sub sub and sub as well as various other subsidiaries sub also owns all of the equity of dre a limited_liability_company disregarded as an entity separate from sub sub owns all of the equity of dre a limited_liability_company disregarded as an entity separate from sub and a percent of sub sub sub and sub own the remaining interests b percent c percent and d percent respectively in sub sub owns all of the equity of sub sub owns all of the equity of sub and sub sub owns all of the equity of sub sub and sub sub also owns an e percent general_partnership interest in sub a limited_partnership classified as a corporation for federal_income_tax purposes sub owns the h percent limited_partnership_interest in sub sub owns all of the equity of sub and f percent of the equity of sub various members of the distributing consolidated_group each of whom will remain a member of the distributing consolidated_group after the proposed transaction own the other g percent of sub sub owns all of the equity of dre a limited_liability_company disregarded as an entity separate from sub for federal_income_tax purposes dre owns an h percent limited_partnership_interest in sub a limited_partnership classified as a corporation for federal_income_tax purposes sub owns the e percent general_partnership interest in sub hereinafter sub and dre are together referred to as the sub shareholders sub owns all of the equity of sub distributing owns all of the equity of dre a country a entity disregarded as an entity separate from distributing for federal_income_tax purposes dre owns all of the equity of distributing a country a corporation distributing owns all of the equity of sub a country a corporation as of date sub will have approximately i dollars in intercompany receivables owing from distributing the distributing receivable sub will have approximately j dollars in intercompany receivables owing from sub the sub receivable sub will have intercompany receivables of at least i dollars owing from sub the sub receivable and distributing will have intercompany receivables of at least i dollars owing from sub the sub receivable in addition at the time of the proposed transaction sub will have a net intercompany payable owing to sub the sub sub intercompany debt the distributing worldwide group is principally engaged in busine sec_1 and busine sec_2 domestically and internationally specifically sub and sub conduct busine sec_1 in state b and state c distributing and its direct and indirect subsidiaries including dre distributing and sub conduct busine sec_1 in country a sub and its direct and indirect subsidiaries including sub sub sub sub sub sub sub and sub conduct busine sec_2 throughout the united_states distributing and its direct and indirect subsidiaries including sub conduct busine sec_2 in country a plr-145256-12 the taxpayer has submitted financial information indicating that i the state b and state c busine sec_1 operations ii the country a busine sec_1 operations iii the domestic busine sec_2 operations and iv the country a busine sec_2 operations each have had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years the distributing worldwide group has determined that the separation of busine sec_1 from busine sec_2 will serve the following corporate business purposes i improving management focus and strategy ii facilitating access to capital iii enhancing employee incentive programs and iv establishing valuable acquisition currency prior transactions in prior years sub and sub distributed and or sold to distributing certain busine sec_1 operating_assets and equity interests in certain entities that conducted busine sec_1 in taxable transactions that constituted intercompany_transactions under sec_1_1502-13 such transactions resulted in intercompany items as defined in sec_1_1502-13 within sub and sub the deferred busine sec_1 intercompany items distributing in turn made tax-free contributions of such assets and equity interests to one or more wholly owned direct or indirect subsidiaries within the distributing consolidated_group that conducted similar_business lines the busine sec_1 transferee entities distributing 4’s subsequent contributions of the assets and equity interests to the busine sec_1 transferee entities did not result in sub or sub taking into account any portion of the deferred busine sec_1 intercompany items as a result the deferred busine sec_1 intercompany items have not yet been taken into account in addition in prior years sub sub sub and sub each acquired busine sec_2 assets from sub sub sub sub and sub such transactions were taxable sales for federal_income_tax purposes that constituted intercompany_transactions under sec_1_1502-13 sub sub sub sub and sub therefore had intercompany items as defined in sec_1_1502-13 from these transactions the deferred busine sec_2 intercompany items that have not yet been taken into account in a prior year not pursuant to the same plan that includes the sub conversion defined below sub transferred certain items of inventory and fixed assets associated with the domestic busine sec_2 to sub in exchange for no consideration the prior sub contribution in a transaction intending to qualify as a sec_351 transfer for federal_income_tax purposes immediately thereafter sub transferred such assets directly and indirectly through subsidiaries to sub proposed transaction plr-145256-12 for what are represented to be valid business reasons distributing proposes to undertake the following steps pursuant to a single integrated_plan to accomplish the separation of busine sec_2 from busine sec_1 controlled contribution and first internal distribution i ii iii iv v vi vii viii ix distributing formed dre a wholly owned state a limited_liability_company with minimal capital and dre formed controlled a wholly owned country a entity each of dre and controlled is disregarded as an entity separate from distributing for federal_income_tax purposes dre will recapitalize its existing capital structure into i preferred shares with a fair_market_value equal to the value of the country a busine sec_2 assets defined below dre preferred shares and ii new common shares with a fair_market_value equal to the difference between the total net fair_market_value of dre and the dre preferred shares distributing will transfer the dre preferred shares to dre solely in exchange for interests in dre of equal value dre will transfer the dre preferred shares to controlled solely in exchange for controlled common shares of equal value distributing will transfer all of the assets and liabilities associated with the country a busine sec_2 including percent of the issued and outstanding shares of sub collectively the country a busine sec_2 assets to controlled in exchange for preferred shares of controlled controlled preferred shares equal to the aggregate value of all assets transferred the controlled contribution distributing will distribute the controlled preferred shares to dre controlled will redeem the controlled preferred shares held by dre in consideration for a note note dre will redeem the dre preferred shares held by controlled in consideration for a note note note will be set off against note and both notes will thereby be paid and canceled x dre will liquidate distributing all of the controlled shares to distributing plr-145256-12 xi controlled will elect to be classified as an association_taxable_as_a_corporation for federal_income_tax purposes under sec_301_7701-2 and sec_301 steps i through xi are collectively referred to as the controlled contribution and the first internal distribution second internal distribution xii distributing will distribute all of the outstanding shares of controlled to distributing in exchange for distributing shares of equal value the second internal distribution internal debt satisfaction xiii xiv sub will transfer the distributing receivable to sub thereby retiring approximately i dollars of the sub receivable held by sub sub will in turn transfer the distributing receivable to sub thereby retiring approximately i dollars of the sub receivable held by sub sub will in turn transfer the distributing receivable to distributing thereby retiring approximately i dollars of the sub receivable held by distributing sub will sell the remainder of the sub receivable to distributing in exchange for a new distributing note distributing will contribute the remainder of the sub receivable to the capital of sub in exchange for no additional equity interests in sub the sub capital_contribution and steps xiii and xiv together the internal debt satisfaction sub conversion xv sub will convert to a limited_liability_company sub llc pursuant to a state conversion statute upon which it will be disregarded as an entity separate from sub for federal_income_tax purposes the sub conversion distributing reorganization and the non-busine sec_2 transfers xvi distributing will transfer all of the issued and outstanding shares of sub to distributing a newly formed wholly owned state a corporation solely in exchange for distributing common shares of equal value the sub equity transfer one day following the sub equity transfer sub will convert to a limited_liability_company sub llc pursuant to a state conversion statute the plr-145256-12 sub conversion and together with the sub equity transfer the distributing reorganization xvii sub llc will distribute dre to distributing sub llc will distribute dre to distributing through sub llc and all other assets held by direct or indirect subsidiaries of sub llc that are not associated with the domestic busine sec_2 collectively the non-busine sec_2 assets if any will be distributed directly or indirectly by those subsidiaries to distributing collectively the non- busine sec_2 transfers sub reorganization xviii xix xx xxi sub will contribute to dre a newly formed state a limited_liability_company disregarded as an entity separate from sub for federal_income_tax purposes its e percent general_partnership interest in sub solely in exchange for dre equity interests sub will transfer all of the issued and outstanding equity interests in dre to distributing solely in exchange for distributing common_stock of equal value the first sub equity transfer dre will transfer its h percent interest in sub to distributing solely in exchange for distributing common_stock of equal value the second sub equity transfer sub will elect to be disregarded as an entity separate from distributing for federal_income_tax purposes under sec_301_7701-2 and sec_301_7701-3 effective as of two days following the second sub equity transfer the sub ctb election and together with the first sub equity transfer and the second sub equity transfer the sub reorganization controlled contribution and third internal distribution xxii xxiii distributing will transfer all of its membership interests in sub llc to controlled a newly formed state a corporation solely in exchange for controlled common shares the controlled contribution distributing will distribute all of the issued and outstanding shares of controlled to distributing in exchange for specifically identified shares of distributing held by distributing the third internal distribution the first internal distribution the second internal distribution and the third internal distribution are collectively referred to as the internal distributions plr-145256-12 sub subs restructuring xxiv xxv xxvi xxvii each of sub sub sub and sub will convert to a limited_liability_company pursuant to a state conversion statute the sub subs conversions sub will become sub llc sub will become sub llc sub will become sub llc and sub will become sub llc collectively the sub llcs each of the sub llcs will be disregarded as an entity separate from sub for federal_income_tax purposes sub llc will distribute to sub i its e percent general_partnership interest in sub and ii all of the issued and outstanding shares of sub the sub llc distribution sub will contribute all of the issued and outstanding equity interests in each of the sub llcs to dre a newly formed wholly owned state b limited_liability_company disregarded as an entity separate from sub for federal_income_tax purposes solely in exchange for all of the equity interests in dre the dre contribution following the dre contribution i sub will contribute busine sec_2 assets to dre solely in exchange for an approximately k percent equity_interest in dre ii sub will contribute busine sec_2 assets to dre solely in exchange for an approximately l percent equity_interest in dre iii sub llc and sub llc will transfer busine sec_2 assets to dre solely in exchange for an approximately m percent equity_interest in dre and iv sub will contribute busine sec_2 assets to dre solely in exchange for an approximately n percent equity_interest in dre collectively the dre contribution causing dre to be classified as a partnership for federal_income_tax purposes after step xxvii sub will own o percent of the equity_interest in dre thereafter dre will transfer certain of the busine sec_2 assets received pursuant to the dre contribution and dre contribution to sub llc and sub llc xxviii each of sub and sub will transfer its entire equity_interest in dre directly to sub in exchange for equity interests in sub of equal value sub llc will contribute its equity_interest in dre to sub llc and sub llc will contribute the interest in dre received from sub llc to sub in transactions intending to be described in sec_351 and sec_1_1502-34 collectively the dre equity interests transfer plr-145256-12 the sub subs conversions the sub llc distribution the dre contribution the dre contribution and the dre equity interests transfer are collectively referred to as the sub subs restructuring debt-for-debt exchange debt-for-equity exchange and external distribution xxix xxx xxxi distributing will contribute all of its interests in controlled and controlled to controlled a newly formed wholly owned state a corporation in exchange for all of the single class of issued and outstanding_stock of controlled approximately p dollars of debt of controlled that qualifies as securities within the meaning of sec_361 the controlled securities and approximately q dollars of cash to be received in step xxxi the controlled contribution controlled will contribute all of the issued and outstanding_stock of controlled to sub a newly formed wholly owned country a corporation in exchange for equity interests in sub the sub contribution in connection with the controlled contribution controlled will borrow cash from an unrelated lender either under a credit facility or by issuing a term note which it will transfer to distributing in step xxix above pursuant to the controlled contribution distributing will directly deposit the cash received into a segregated bank account pursuant to the plan_of_reorganization that includes the controlled contribution and the external distribution defined below following the external distribution distributing will use the cash received to pay obligations owed to certain creditors and possibly to pay quarterly dividends to shareholders and or redeem shares from shareholders in each case within r months following the external distribution obligations paid with the cash so received may include certain long- term indebtedness previously incurred by distributing including associated fees such as consent fees ordinary course liabilities whenever incurred and borrowings under a revolving credit facility that may be incurred by distributing prior to the completion of the proposed transaction xxxii on or around the date of the controlled contribution distributing will issue debt distributing debt to one or more financial institutions collectively the financial_institution for cash the first debt issuance the financial_institution may choose to enter into hedging arrangements interest or credit risk with respect to the distributing debt with third parties unrelated to distributing and its affiliates in the ordinary course of its business xxxiii at least s days after the first debt issuance distributing will enter into an exchange_agreement the debt-for-debt exchange_agreement with the financial_institution pursuant to which distributing will retire some or all of the plr-145256-12 distributing debt issued in the first debt issuance in exchange for the controlled securities at least t days after the first debt issuance and pursuant to the debt-for-debt exchange_agreement distributing will transfer the controlled securities to the financial_institution in repayment of some or all of such distributing debt the debt-for-debt exchange thereafter distributing understands that the financial_institution will sell the controlled securities to third-party investors xxxiv distributing will distribute pro_rata to the shareholders of distributing shares of controlled common_stock representing at least u percent of the total issued and outstanding shares of controlled common_stock the external distribution collectively the internal distributions and the external distribution will be referred to as the distributions distributing will retain the retention the remaining controlled common_stock the retained stock xxxv within v months following the external distribution distributing will issue additional distributing debt to the financial_institution for cash the second debt issuance financial_institution may choose to enter into hedging arrangements interest or credit risk with respect to the distributing debt with third parties unrelated to distributing and its affiliates in the ordinary course of its business xxxvi at least s days after the second debt issuance distributing will enter into an exchange_agreement the debt-for-equity exchange_agreement with the financial_institution pursuant to which distributing will retire some or all of the distributing debt issued in the second debt issuance in exchange for some or all of the retained stock the sum of i the retained stock transferred pursuant to the debt-for-equity exchange_agreement ii controlled shares issued in a greenshoe or overallotment option and iii any shares issued to employees as equity compensation will represent no more than w percent of the total issued and outstanding controlled stock at least t days after the second debt issuance distributing will transfer some or all of the retained stock to the financial_institution in repayment of some or all of such distributing debt the debt-for-equity exchange distributing understands that the financial_institution will sell such controlled stock to third- party investors in a public offering the offering the debt-for-equity exchange is likely to occur at least x months following the external distribution and will in no event be completed later than v months following the external distribution xxxvii pursuant to the plan that includes the external distribution distributing may transfer any retained stock not transferred pursuant to the debt-for-equity plr-145256-12 exchange to its shareholders in exchange for shares of distributing common_stock the share repurchase any share repurchase will in no event be completed later than v months after the external distribution any of the retained stock not disposed of pursuant to the debt-for-equity exchange or the share repurchase will be disposed of as soon as is commercially practicable but in any event not later than y months after the external distribution in connection with the proposed transaction distributing and controlled will enter into certain new agreements relating to the separation of busine sec_1 from busine sec_2 the continuing arrangements the continuing arrangements will include a separation and distribution agreement a tax_matters_agreement a transition services agreement an employee matters agreement and certain continuing commercial arrangements under which distributing and or its subsidiaries and controlled and or its subsidiaries will provide goods services or facilities to each other on market-based terms representations the taxpayer makes the following representations with respect to the proposed transaction controlled contribution and first internal distribution 1a 1b 1c 1d 1e the indebtedness if any owed by controlled to distributing after the first internal distribution will not constitute stock_or_securities no part of the consideration to be distributed in the first internal distribution will be received by any shareholder of distributing as a creditor employee or in any capacity other than that of a shareholder of distributing in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing will treat all members of its separate_affiliated_group as defined in sec_355 the distributing sag as one corporation the five years of financial information submitted on behalf of the country a busine sec_1 conducted by the distributing sag are representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted in applying sec_355 regarding the active_conduct_of_a_trade_or_business controlled will treat all members of its separate_affiliated_group as defined in sec_355 the controlled sag as one corporation plr-145256-12 1f 1g 1h 1i 1j 1k 1l 1m the five years of financial information submitted on behalf of the country a busine sec_2 conducted by the controlled sag are representative of its present business operations and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted the distributing sag neither acquired the country a busine sec_1 nor acquired control of an entity conducting the country a busine sec_1 during the five-year period ending on the date of the first internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part the controlled sag neither acquired the country a busine sec_2 nor acquired control of an entity conducting the country a busine sec_2 during the five-year period ending on the date of the first internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part following the first internal distribution the distributing sag will continue the active_conduct of the country a busine sec_1 and the controlled sag will continue the active_conduct of the country a busine sec_2 independently and with their separate employees the first internal distribution will be carried out for the corporate business_purpose of facilitating the external distribution the first internal distribution is motivated in whole or in substantial part by this corporate business_purpose the first internal distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both for purposes of sec_355 immediately after the first internal 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 date of the first internal distribution for purposes of sec_355 immediately after the first internal 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 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 first internal distribution or ii attributable to distributions on distributing stock_or_securities that were plr-145256-12 1n 1o 1p 1q 1r 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 first internal distribution except as otherwise provided in the proposed transaction the first internal 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 immediately after the first internal distribution either i no person will hold a percent or greater interest within the meaning of sec_355 in the stock of distributing or controlled who did not hold such an interest before the transaction or ii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 the aggregate fair_market_value of the country a busine sec_2 assets transferred to controlled in the controlled contribution will equal or exceed the aggregate adjusted_basis of such assets the total adjusted bases of the country a busine sec_2 assets transferred to controlled in the controlled contribution will exceed the sum of the liabilities assumed within the meaning of sec_357 by controlled plus any liabilities to which the transferred assets are subject in each case excluding liabilities to which sec_357 applies the total fair_market_value of the country a busine sec_2 assets transferred to controlled by distributing in the controlled contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled in connection with the controlled contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the controlled contribution and iii the amount of any cash and the fair_market_value of any other_property within the meaning of sec_361 received by distributing from controlled in connection with the controlled contribution the fair_market_value of the country a busine sec_2 assets of controlled will exceed the amount of its liabilities immediately after the controlled contribution 1s the liabilities assumed in the controlled contribution and any liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred plr-145256-12 1t 1u 1v 1w 1x 1y no investment_credit determined under sec_46 has been or will be claimed with respect to any property contributed to controlled by distributing in connection with the controlled contribution except possibly pursuant to the elimination or reduction of intercompany balances in connection with the proposed transaction distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the first internal distribution except for indebtedness that may be created in the ordinary course of business in connection with the continuing arrangements no indebtedness will exist between distributing and controlled at the time of or subsequent to the first internal distribution except as described in the continuing arrangements payments made in connection with all continuing transactions 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 or will be investment companies as defined in sec_368 and iv following the first internal distribution distributing will compute its pre- distribution amount and post-distribution amount with respect to distributing and controlled as defined under sec_1_367_b_-5 and to the extent distributing 2’s pre-distribution amount with respect to either distributing or controlled exceeds the post-distribution amount with respect to either distributing or controlled distributing will make basis adjustments and recognize income if any as required under applicable regulations 1z the notice requirements of sec_1_367_b_-1 will be satisfied for each of the controlled contribution and the first internal distribution 1aa the contribution of assets by distributing to controlled in exchange for stock of controlled in the controlled contribution will not be an exchange described in sec_1_367_b_-4 sec_1_367_b_-4 or sec_1_367_b_-4 such contribution will be an exchange to which sec_1_367_b_-1 and sec_1 b - a apply no amount will be included in income as a deemed_dividend equal to the sec_1248 amount under sec_367 as a result of the contribution 1bb each of distributing and sub will be a controlled_foreign_corporation within the meaning of sec_957 immediately before and after each of the controlled contribution and first internal distribution controlled will be a plr-145256-12 1cc 1dd 1ee 1ff controlled_foreign_corporation within the meaning of sec_957 immediately after the controlled contribution and immediately before and after the first internal distribution neither distributing nor controlled will be a passive_foreign_investment_company pfic within the meaning of sec_1297 immediately before or after the controlled contribution and the first internal distribution distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to each of distributing and sub immediately before and after each of the controlled contribution and the first internal distribution distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to controlled immediately after the controlled contribution and immediately before and after the first internal distribution controlled will not hold any united_states real_property interests as defined in sec_897 immediately before or after the controlled contribution and the first internal distribution the proposed transaction will not include the transfer of i equity interests of any corporation that has been a u s transferor the transferee foreign_corporation the transferred corporation or successor thereto or ii substantially_all of the assets of the transferred corporation with respect to any unexpired gain_recognition_agreement within the meaning of sec_1_367_a_-3 sec_1_367_a_-8 or sec_1_367_a_-8t second internal distribution 2a 2b 2c 2d the indebtedness if any owed by controlled to distributing after the second internal distribution will not constitute stock_or_securities the fair_market_value of the controlled stock will be approximately equal to the fair_market_value of the distributing shares surrendered by distributing in the exchange no part of the consideration to be distributed in the second internal distribution will be received by any shareholder of distributing as a creditor employee or in any capacity other than that of a shareholder of distributing in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing will treat all members of its separate_affiliated_group as defined in sec_355 the distributing sag as one corporation plr-145256-12 2e 2f 2g 2h 2i 2j 2k 2l 2m the five years of financial information submitted on behalf of the country a busine sec_1 conducted by the distributing sag are representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted in applying sec_355 regarding the active_conduct_of_a_trade_or_business controlled will treat all members of its separate_affiliated_group as defined in sec_355 ie the controlled sag as one corporation the five years of financial information submitted on behalf of the country a busine sec_2 conducted by the controlled sag are representative of its present business operation and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted the distributing sag neither acquired the country a busine sec_1 nor acquired control of an entity conducting the country a busine sec_1 during the five-year period ending on the date of the second internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part the controlled sag neither acquired the country a busine sec_2 nor acquired control of an entity conducting the country a busine sec_2 during the five-year period ending on the date of the second internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part following the second internal distribution the distributing sag will continue the active_conduct of the country a busine sec_1 and the controlled sag will continue the active_conduct of the country a busine sec_2 independently and with their separate employees the second internal distribution will be carried out for the corporate business_purpose of facilitating the external distribution the second internal distribution is motivated in whole or in substantial part by this corporate business_purpose the second internal distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both for purposes of sec_355 immediately after the second internal 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 date of the second internal distribution plr-145256-12 2n 2o 2p 2q 2r 2s 2t 2u for purposes of sec_355 immediately after the second internal 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 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 second internal distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the second internal distribution except as otherwise provided in the proposed transaction the second internal 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 immediately after the second internal distribution either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of distributing or controlled who did not hold such an interest before the transaction or ii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 except possibly pursuant to the elimination or reduction of intercompany balances in connection with the proposed transaction distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the second internal distribution no indebtedness will exist between distributing and controlled at the time of or subsequent to the second internal distribution payments made in connection with all continuing transactions between distributing and controlled if any 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 or will be investment companies as defined in sec_368 and iv distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to controlled immediately before the second internal distribution and distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to controlled immediately after the second internal distribution plr-145256-12 2v controlled will not be a pfic within the meaning of sec_1297 immediately before the second internal distribution sub conversion 3a 3b 3c 3d 3e 3f 3g 3h 3i 3j sub and sub will adopt a plan_of_liquidation by conversion of sub into an llc the sub plan_of_liquidation and the sub conversion will occur pursuant to the sub plan_of_liquidation sub on the date of adoption of the sub plan_of_liquidation the sub plan date and at all times thereafter until the sub conversion is completed will own percent of the single outstanding class of sub stock no shares of sub have been redeemed during the three years preceding the sub plan date all deemed transfers from sub to sub will occur on the date of the sub conversion upon the sub conversion sub will cease to be a going concern and will cease to conduct any activities as a corporation for federal_income_tax purposes upon the sub conversion all of the stock of sub will be cancelled and it will cease to exist as a corporation for federal_income_tax purposes sub as a corporation will retain no assets following the sub conversion for federal_income_tax purposes sub will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the sub plan date and except pursuant to the prior sub contribution except as otherwise provided in the proposed transaction and except for the transfer of the assets received pursuant to the prior sub contribution dispositions in the ordinary course of business and dispositions occurring more than three years prior to the sub plan date no assets of sub have been or will be disposed of by either sub or sub except for the distributing reorganization and the contribution by distributing of the sub llc interests in the controlled contribution the sub conversion will not be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of sub if persons holding directly or indirectly more than percent in value of the sub stock as determined by application of sec_318 as modified by section plr-145256-12 3k 3l 3m 3n 3o 3p 3q c also hold directly or indirectly more than percent in value of the stock in recipient following the sub conversion there is no plan or intention to undertake any_action eg an election to be treated as an association_taxable_as_a_corporation for federal_income_tax purposes under sec_301_7701-3 etc and no other circumstances will exist eg the existence of a second regarded_owner of a member interest that will prevent sub from being treated as disregarded from the owner of its membership interests for federal_income_tax purposes under sec_301_7701-2 and sec_301_7701-3 prior to the sub plan date no assets of sub will have been distributed in_kind transferred or sold to sub except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to the sub plan date sub will report all earned_income represented by assets that will be deemed distributed to sub the fair_market_value of the assets of sub will exceed its liabilities both at the sub plan date and immediately prior to the time of the sub conversion except for the sub 4-sub intercompany debt there is no intercorporate debt existing between sub and sub and none has been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the sub plan date sub is not an organization that is exempt from federal_income_tax under sec_501 or another provision of the code all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to sub conversion have been fully disclosed distributing reorganization 4a 4b distributing will receive solely distributing stock in the distributing reorganization immediately before the distributing reorganization distributing will own percent of the stock of sub and immediately following the distributing reorganization distributing will own percent of the stock of distributing plr-145256-12 4c the fair_market_value of the distributing stock received by distributing will be approximately equal to the fair_market_value of the sub stock deemed surrendered in the exchange 4d generally sub distributing and distributing will each pay their own expenses if any incurred in connection with the distributing reorganization distributing may however pay certain expenses_incurred in connection with the distributing reorganization on behalf of sub and distributing but in no event will distributing pay any expenses on behalf of sub distributing or any other member of the distributing worldwide group 4e 4f 4g 4h 4i 4j immediately after the distributing reorganization distributing will own percent of the outstanding_stock of distributing and will own such stock solely by reason of its ownership of the sub stock immediately prior to the distributing reorganization immediately after the distributing reorganization distributing will hold directly and through sub llc as a disregarded_entity all the assets held by sub immediately prior to the distributing reorganization except for assets used to pay expenses in connection with the distributing reorganization if any the assets used to pay expenses will be less than one percent of the fair_market_value of the net assets of sub immediately prior to the distributing reorganization no assets will be distributed the liabilities of sub deemed to be assumed by distributing plus the liabilities if any to which the assets deemed to be transferred are subject were incurred by sub in the ordinary course of its business and are associated with the assets deemed transferred at the time of the distributing reorganization sub will not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in sub at the time the distributing reorganization neither sub nor distributing will be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 distributing will be newly formed for the purpose of effecting the distributing reorganization at all times prior to the transaction distributing i will not engage in business activity ii will have no federal_income_tax attributes attributes described in sec_381 and iii will not hold any assets except for a nominal amount of assets held to facilitate its reorganization and will not incur any liabilities plr-145256-12 4k 4l 4m 4n except in connection with the third internal distribution distributing has no plan or intention to i redeem or reacquire any of its stock issued in the distributing reorganization or ii issue any additional shares of distributing stock there will be no plan or intention on the part of any party related to distributing to acquire any of the stock of distributing received by distributing pursuant to the distributing reorganization except as otherwise provided in the proposed transaction distributing has no plan or intention to sell or otherwise dispose_of any of the assets of sub acquired in the transaction except for dispositions in the ordinary course of business immediately before the distributing reorganization the fair_market_value of the assets of sub will exceed the sum of the liabilities of sub whether indebtedness or other forms of obligations including contingent or related_party obligations plus the liabilities if any to which the assets of sub are subject 4o the distributing reorganization will be carried out for the corporate business_purpose of facilitating the external distribution sub reorganization 5a 5b 5c 5d the fair_market_value of the distributing stock received by the sub shareholders will be approximately equal to the fair_market_value of the sub stock deemed surrendered in the exchange immediately before the sub ctb election sub will be classified as a corporation for federal_income_tax purposes under sec_301_7701-3 immediately after the sub ctb election sub will be disregarded as an entity separate from distributing for federal_income_tax purposes under sec_301_7701-3 throughout the 12-month_period ending immediately before the sub reorganization sub will not i sell exchange or otherwise dispose_of any of its assets except for dispositions in the ordinary course of business or ii redeem reacquire or make distributions other than regular normal distributions with respect to any of its equity interests 5e there is no plan or intention for distributing or any person related as defined in sec_1_368-1 to distributing to acquire or redeem any distributing stock issued or deemed issued in the sub reorganization plr-145256-12 5f 5g 5h 5i 5j 5k 5l either directly or through any transaction agreement or other arrangement with any other person at least percent of the proprietary interest in sub will be exchanged for distributing stock and will be preserved within the meaning of sec_1_368-1 distributing has no plan or intention to sell or otherwise dispose_of any of the assets of sub deemed to be acquired in the transaction except for dispositions made in the ordinary course of business distributing will be deemed to acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by sub immediately prior to the sub reorganization for purposes of this representation amounts used by sub to pay its reorganization expenses if any and all redemptions and distributions except for regular normal dividends made by sub immediately preceding the sub reorganization are included as assets of sub held immediately prior to the sub reorganization after the sub reorganization the sub shareholders will be in control of distributing within the meaning of sec_368 the liabilities of sub deemed to be assumed by distributing plus the liabilities if any to which the assets deemed to be transferred are subject were incurred by sub in the ordinary course of its business and are associated with the assets deemed transferred following the sub reorganization distributing will continue the historic_business of sub or use a significant portion of sub 14’s historic_business_assets in a business as required by sec_1_368-1 at the time of the sub reorganization distributing will not have any outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in distributing 5m generally distributing sub and the sub shareholders will each pay their own expenses if any incurred in connection with the sub reorganization distributing may however pay certain expenses_incurred in connection with the sub reorganization on behalf of distributing sub and the sub shareholders but in no event will distributing pay any expenses on behalf of distributing sub the sub shareholders or any other member of the distributing worldwide group plr-145256-12 5n 5o 5p 5q 5r 5s 5t at the time of the sub reorganization no party to the sub reorganization will be an investment_company as defined in sec_368 and iv at the time of the sub reorganization no intercorporate indebtedness will exist between distributing and sub that was issued acquired or settled at a discount the fair_market_value of the assets deemed transferred to distributing by sub will exceed the amount of any liabilities whether indebtedness or other forms of obligations including contingent or related_party obligations of sub immediately before the sub reorganization including any liabilities that are cancelled extinguished or deemed assumed by distributing in connection with the sub reorganization immediately after the sub reorganization the fair_market_value of the assets of distributing will exceed the amount of its liabilities including the liabilities of any disregarded entities whether indebtedness or other forms of obligations including contingent obligations at the time the sub reorganization neither sub nor distributing will be under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 the sub reorganization will be undertaken pursuant to a plan_of_reorganization the sub reorganization will be carried out for the corporate business_purpose of facilitating the external distribution controlled contribution and third internal distribution 6a 6b 6c 6d the indebtedness if any owed by controlled to distributing after the third internal distribution will not constitute stock_or_securities the fair_market_value of the controlled stock will be approximately equal to the fair_market_value of the distributing shares surrendered by distributing in the exchange no part of the consideration to be distributed in the third internal distribution will be received by any shareholder of distributing as a creditor employee or in any capacity other than that of a shareholder of distributing in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing will treat all members of its separate_affiliated_group as defined in sec_355 the distributing sag as one corporation plr-145256-12 6e 6f 6g 6h 6i 6j 6k 6l 6m the five years of financial information submitted on behalf of the state b and state c busine sec_1 conducted by the distributing sag are representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted in applying sec_355 regarding the active_conduct_of_a_trade_or_business controlled will treat all members of its separate_affiliated_group as defined in sec_355 the controlled sag as one corporation the five years of financial information submitted on behalf of the domestic busine sec_2 conducted by the controlled sag are representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted the distributing sag neither acquired the state b and state c busine sec_1 nor acquired control of an entity conducting the state b and state c busine sec_1 during the five-year period ending on the date of the third internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part the controlled sag neither acquired the domestic busine sec_2 nor acquired control of an entity conducting the domestic busine sec_2 during the five-year period ending on the date of the third internal distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part following the third internal distribution the distributing sag will continue the active_conduct of the state b and state c busine sec_1 and the controlled sag will continue the active_conduct of the domestic busine sec_2 independently and with their separate employees the third internal distribution will be carried out for the corporate business_purpose of facilitating the external distribution the third internal distribution is motivated in whole or in substantial part by this corporate business_purpose the third internal distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both for purposes of sec_355 immediately after the third internal 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 date of the third internal distribution plr-145256-12 6n 6o 6p 6q 6r 6s for purposes of sec_355 immediately after the third internal 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 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 third internal distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined in sec_355 and during the five- year period determined after applying sec_355 ending on the date of the third internal distribution except as otherwise provided in the proposed transaction the third internal 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 immediately after the third internal distribution either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in the stock of distributing or controlled who did not hold such an interest before the transaction or ii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 the aggregate fair_market_value of the assets of domestic busine sec_2 transferred to controlled in the controlled contribution will equal or exceed the aggregate adjusted_basis of such assets the total adjusted_basis of the assets transferred to controlled in the controlled contribution will exceed the sum of the liabilities assumed within the meaning of sec_357 by controlled plus any liabilities to which the transferred assets are subject in each case excluding liabilities to which sec_357 applies the total fair_market_value of the assets transferred to controlled by distributing in the controlled contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled in connection with the controlled contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the controlled contribution and iii the amount of any cash and the fair_market_value of any other_property within the meaning of sec_361 received by distributing from controlled in connection with the controlled contribution the fair_market_value of the assets of controlled plr-145256-12 6t 6u 6v 6w 6x 6y 6z will exceed the amount of its liabilities immediately after the controlled contribution the liabilities assumed in the controlled contribution and any liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred no investment_credit determined under sec_46 has been or will be claimed with respect to any property contributed to controlled by distributing in connection with the controlled contribution except possibly pursuant to the elimination or reduction of intercompany balances in connection with the proposed transaction distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the third internal distribution except for indebtedness that may be created in the ordinary course of business in connection with the continuing arrangements no indebtedness will exist between distributing and controlled at the time of or subsequent to the third internal distribution except as described in the continuing arrangements payments made in connection with all continuing transactions 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 or will be investment companies as defined in sec_368 and iv there is no regulatory legal contractual or economic compulsion or requirement that distributing make all or part of the sub capital_contribution as a condition to the third internal distribution sub subs restructuring 7a 7b immediately following the dre contribution dre will qualify as a valid partnership as defined in sec_7701 for federal_income_tax purposes and characterized as such under subchapter_k following the sub subs restructuring there is no plan or intention i to take any_action that would cause dre to fail to qualify as a valid partnership for federal_income_tax purposes ii to sell or otherwise dispose_of any of the assets transferred to dre iii to liquidate dre iv to take any_action that would result in the involuntary liquidation of dre or v for either sub or sub to plr-145256-12 reacquire the assets contributed to dre pursuant to the dre contribution and dre contribution external distribution 8a 8b 8c 8d 8e 8f 8g 8h the indebtedness owed by controlled to distributing after the external distribution if any will not constitute stock_or_securities the fair_market_value of the controlled common_stock to be received by each shareholder of distributing pursuant to the share repurchase if any will be approximately equal to the fair_market_value of the distributing common_stock surrendered by the shareholder in the exchange except with regard to the holders of restricted distributing stock no part of the consideration to be distributed in the external distribution will be received by any shareholder of distributing as a creditor employee or in any capacity other than that of a shareholder of distributing the sum of i the shares of controlled common_stock distributed in the external distribution with respect to restricted_stock of distributing and ii the retained stock transferred to the financial_institution in connection with the debt-for-equity exchange if any will not represent more than w percent of the total combined voting power of the controlled common_stock outstanding after the external distribution in applying sec_355 regarding the active_conduct_of_a_trade_or_business distributing will treat all members of its separate_affiliated_group as defined in sec_355 the distributing sag as one corporation the five years of financial information submitted on behalf of the busine sec_1 conducted by the distributing sag are representative of its present operations and with regard to such operations there have been no substantial operational changes since the date of the last financial statements submitted in applying sec_355 regarding the active_conduct_of_a_trade_or_business controlled will treat all members of its separate_affiliated_group as defined in sec_355 the controlled sag as one corporation the five years of financial information submitted on behalf of the busine sec_2 conducted by the controlled sag are representative of its present business operation and with regard to such business there have been no substantial operational changes since the date of the last financial statements submitted the distributing sag neither acquired the busine sec_1 nor acquired control of an entity conducting the busine sec_1 during the five-year period ending on the date of the external distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part plr-145256-12 8i 8j 8k 8l 8m 8n the controlled sag neither acquired the busine sec_2 nor acquired control of an entity conducting the busine sec_2 during the five-year period ending on the date of the external distribution in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part for federal_income_tax purposes following the external distribution the distributing sag will continue the active_conduct of the busine sec_1 and the controlled sag will continue the active_conduct of the busine sec_2 independently and with their separate employees the external distribution will be carried out to permit the busine sec_2 to pursue the business development strategies most appropriate for optimal growth and operation by i improving management focus and strategy ii facilitating access to capital iii enhancing employee incentive programs and iv establishing valuable acquisition currency the external distribution is motivated in whole or in substantial part by these corporate business purposes the external distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both for purposes of sec_355 immediately after the external 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 date of the external distribution for purposes of sec_355 immediately after the external 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 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 external distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the external distribution 8o the external 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 plr-145256-12 8p 8q 8r 8s 8t 8u 8v immediately after the external distribution either i no person will hold a percent or greater interest within the meaning of sec_355 in the stock of distributing or controlled who did not hold such an interest before the transaction or ii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 the aggregate fair_market_value of the stock of controlled and controlled transferred to controlled in the controlled contribution will equal or exceed the aggregate adjusted_basis of the transferred assets the total adjusted_basis of the assets transferred to controlled in the controlled contribution will exceed the sum of i the liabilities assumed within the meaning of sec_357 by controlled plus any liabilities to which the transferred assets are subject in each case excluding liabilities to which sec_357 applies and ii the total amount of cash and the fair_market_value of any other_property within the meaning of sec_361 received by distributing from controlled and transferred by it to its creditors or shareholders in connection with the plan_of_reorganization the total fair_market_value of the assets transferred to controlled by distributing in the controlled contribution will exceed the sum of i the amount of any liabilities assumed within the meaning of sec_357 by controlled in connection with the controlled contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the controlled contribution and iii the amount of any cash and the fair_market_value of any other_property within the meaning of sec_361 received by distributing from controlled in connection with the controlled contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the controlled contribution the liabilities assumed in the controlled contribution if any and any liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred no investment_credit determined under sec_46 has been or will be claimed with respect to any property contributed to controlled by distributing in connection with the controlled contribution except possibly pursuant to the elimination or reduction of intercompany balances in connection with the proposed transaction distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the external distribution plr-145256-12 8w 8x 8y 8z 8aa 8bb 8cc except for i indebtedness that may be created in the ordinary course of business in connection with the continuing arrangements and ii the controlled securities if any held by distributing prior to the debt-for-debt exchange no indebtedness will exist between distributing and controlled at the time of or subsequent to the external distribution immediately before the external 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 any excess_loss_account of a member in the stock of another member that is required to be taken into account by sec_1_1502-19 will be included in income as appropriate except as described in the continuing arrangements payments made in connection with all continuing transactions 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 or will be investment companies as defined in sec_368 and iv the sum of the amount of distributing debt exchanged for controlled stock and controlled securities if any in the debt-for-equity exchange and the debt-for-debt exchange respectively plus the amount of distributing debt repaid with the cash received by distributing in the controlled contribution will be less than the weighted quarterly average of all of distributing 4’s debt owed to unrelated third parties for the months ending on the day before its board first discussed the proposed divestiture of the busine sec_2 the controlled securities issued to distributing in connection with the controlled contribution if any will qualify as securities within the meaning of sec_361 distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to controlled immediately before the controlled contribution and controlled will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to controlled immediately after the controlled contribution 8dd controlled will not be a pfic within the meaning of sec_1297 immediately before the controlled contribution rulings plr-145256-12 based solely on the information provided and representations made we rule as follows controlled contribution and first internal distribution steps i through xi will be treated as if distributing contributed the country a busine sec_2 assets to controlled in exchange for all the outstanding shares of controlled stock and the assumption_of_liabilities associated with the country a busine sec_2 assets and then distributed the controlled stock to distributing see revrul_77_191 1977_1_cb_94 and revrul_83_142 1983_2_cb_68 the controlled contribution followed by the first internal distribution will be a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize gain_or_loss upon the controlled contribution sec_361 a - b and a controlled will not recognize gain_or_loss upon the controlled contribution sec_1032 controlled 1’s basis in each asset received in the controlled contribution will equal the basis of such asset in the hands of distributing immediately before the controlled contribution sec_362 controlled 1’s holding_period in each of the assets received in the controlled contribution will include the period during which distributing held such asset sec_1223 distributing will not recognize gain_or_loss upon the first internal distribution sec_361 distributing will not recognize gain_or_loss and no amount will be includible in its income upon the receipt of controlled stock in the first internal distribution sec_355 distributing 2’s basis in the controlled stock and the distributing stock immediately after the first internal distribution will equal the basis of the distributing stock distributing held immediately before the first internal distribution allocated between the stock of distributing and controlled in proportion to their relative fair market values at the time of the first internal distribution in accordance with sec_1_358-2 sec_358 and c plr-145256-12 distributing 2’s holding_period in the controlled stock received will include the holding_period of the distributing shares held by distributing with respect to which the first internal distribution is made provided the distributing stock was held as a capital_asset on the date of the first internal distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 the first internal distribution will be an exchange to which sec_1_367_b_-1 sec_1_367_b_-5 b -5 c and f apply if distributing 2’s post-distribution amount as defined in sec_1_367_b_-5 with respect to distributing or controlled is less than its pre-distribution amount as defined in sec_1_367_b_-5 with respect to such corporation distributing 2’s basis in such stock immediately after the first internal distribution must be reduced by the amount of the difference distributing 2’s basis in such stock however must not be reduced below zero to the extent the foregoing reduction would reduce its basis below zero distributing must instead include such amount in income as a deemed_dividend from such corporation if distributing reduces the basis in the stock of distributing or controlled or has an inclusion with respect to such stock distributing must increase its basis in the stock of the other corporation to the extent provided in sec_1_367_b_-5 except for purposes of sec_355 payments made between any of distributing and controlled and their respective affiliates under any of the continuing arrangements regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period ending on or before the first internal distribution or for a taxable_period beginning before and ending after the first internal distribution and ii will not become fixed and ascertainable until after the first internal distribution will be viewed as occurring before the first internal distribution 344_us_6 revrul_83_73 1983_1_cb_84 second internal distribution distributing will not recognize gain_or_loss upon the second internal distribution sec_355 distributing will not recognize gain_or_loss and no amount will be includible in its income upon the receipt of controlled stock in the second internal distribution sec_355 distributing 4’s basis in the controlled stock immediately following the second internal distribution will equal distributing 4’s basis in the distributing shares plr-145256-12 exchanged therefor in accordance with sec_1_358-2 sec_358 and c distributing 4’s holding_period in the controlled stock received will include the holding_period of the distributing shares distributing held provided the distributing stock was held as a capital_asset on the date of the second internal distribution sec_1223 distributing 2’s earnings_and_profits will be adjusted and controlled 1’s earnings_and_profits will be determined in accordance with sec_312 and sec_1_312-10 except for purposes of sec_355 payments made between any of distributing and controlled and their respective affiliates under any of the continuing arrangements regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period ending on or before the second internal distribution or for a taxable_period beginning before and ending after the second internal distribution and ii will not become fixed and ascertainable until after the second internal distribution will be viewed as occurring before the second internal distribution 344_us_6 revrul_83_73 1983_1_cb_84 the earnings_and_profits of controlled to the extent attributable to distributing under sec_1_1248-2 or sec_1_1248-3 whichever is applicable that were accumulated in taxable years of controlled beginning after date and during the period in which controlled was a controlled_foreign_corporation will be attributable to such stock held by distributing sec_1 a sub conversion the sub conversion will be treated as a distribution by sub in complete_liquidation under sec_332 sub will not recognize gain_or_loss on the receipt of the assets and liabilities of sub pursuant to the sub conversion sec_332 sub will not recognize gain_or_loss on the distribution of its assets and liabilities to sub in the sub conversion sec_337 sub 1’s basis in each asset received from sub pursuant to the sub conversion will equal the basis of that asset in the hands of sub immediately before the sub conversion sec_334 plr-145256-12 sub 1’s holding_period in each asset received from sub in the sub conversion will include the period during which sub held such asset sec_1223 sub will succeed to and take into account the items of sub 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 except to the extent sub 4’s earnings_and_profits are reflected in sub 1’s earnings_and_profits sub will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of the sub conversion sec_381 and sec_1_381_c_2_-1 and sec_1 a any deficit in the earnings_and_profits of sub will be used only to offset earnings_and_profits accumulated after the date of the sub conversion sec_381 as a result of the sub conversion sub will become a successor person to sub and will succeed to and take into account under the rules of sec_1_1502-13 sub 4’s intercompany items including the deferred busine sec_1 intercompany items and the deferred busine sec_2 intercompany items sec_1_1502-13 distributing reorganization for u s federal_income_tax purposes the distributing reorganization will be treated as a transfer by sub of its assets to distributing in exchange for distributing stock and distributing 3’s assumption of or taking subject_to the liabilities of sub followed by sub 1’s distribution of the distributing stock to its sole shareholder distributing the distributing reorganization will qualify as a reorganization within the meaning of sec_368 sub and distributing will each be a_party_to_a_reorganization within the meaning of sec_368 sub will not recognize gain_or_loss upon the transfer of all of its assets to distributing in exchange for distributing stock and the assumption_of_liabilities sec_361 and sec_357 distributing will not recognize gain_or_loss upon the receipt of the sub assets sec_1032 distributing 3’s basis in each asset acquired from sub will be the same as sub 1’s basis in such asset immediately before the distributing reorganization sec_362 plr-145256-12 distributing 3’s holding_period for the assets acquired from sub will include the period during which sub held such assets sec_1223 sub will not recognize gain_or_loss on the distribution to distributing of the distributing stock sec_361 distributing will not recognize gain_or_loss as the shareholder of sub upon the receipt of the stock of distributing in exchange for the stock of sub sec_354 distributing 4’s basis in each share of distributing stock received in exchange for sub stock will equal the basis of each share of sub stock exchanged therefore sec_358 and sec_1_358-2 distributing 4’s holding_period in the distributing stock will include the period during which distributing held the sub stock exchanged therefor provided that distributing held the sub stock as a capital_asset on the date of the exchange sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 sec_381 and sec_1_381_a_-1 the taxable_year of sub will not close on the date of the distributing reorganization and such taxable_year will continue in the name of distributing sec_1_381_b_-1 neither the sub reorganization nor the distributions will preclude the distributing reorganization from qualifying as a sec_368 reorganization revrul_96_29 1996_1_cb_50 as a result of the distributing reorganization distributing will become a successor person to sub and sub and will succeed to and take into account under the rules of sec_1_1502-13 sub 1’s and sub 4’s intercompany items including the deferred busine sec_1 intercompany items and the deferred busine sec_2 intercompany items sec_1_1502-13 sub reorganization for federal_income_tax purposes the sub reorganization will be treated as i a transfer by sub of all of its assets to distributing solely in exchange for distributing stock and ii the distribution by sub of all of the distributing stock to the sub shareholders in exchange for all of the sub shareholders’ stock in sub plr-145256-12 the sub reorganization will qualify as a reorganization within the meaning of sec_368 sub and distributing will each be a_party_to_a_reorganization within the meaning of sec_368 sub will not recognize gain_or_loss on the transfer of its assets to distributing in exchange for distributing stock in the sub reorganization sec_361 distributing will not recognize gain_or_loss on its receipt of sub 14’s assets in exchange for distributing stock in the sub reorganization sec_1032 sub will not recognize gain_or_loss on the distribution of the distributing stock to the sub shareholders in the sub reorganization sec_361 the sub shareholders will not recognize gain_or_loss on their exchange of sub stock for distributing stock in the sub reorganization sec_354 the sub shareholders’ basis in the distributing stock received in the sub reorganization will be equal to the basis of the sub stock exchanged therefor in the sub reorganization sec_358 and sec_1_358-2 the sub shareholders’ holding_period for the distributing stock received in the sub reorganization will include the period during which such shareholders held the sub stock exchanged therefor provided that such sub stock is held as a capital_asset in the hands of the sub shareholders on the date of the sub reorganization sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 sec_381 and sec_1_381_a_-1 these will be taken into account by distributing subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder controlled contribution and third internal distribution the controlled contribution followed by the third internal distribution will be a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize gain_or_loss upon the controlled contribution sec_361 a - b and a plr-145256-12 controlled will not recognize gain_or_loss upon the controlled contribution sec_1032 controlled 2’s basis in each of the assets received will be equal to the basis of the asset in the hands of distributing immediately before the controlled contribution sec_362 controlled 2’s holding_period in each of the assets received will include the period during which distributing held such asset sec_1223 distributing will not recognize gain_or_loss upon the third internal distribution sec_361 distributing will not recognize gain_or_loss and no amount will be includible in its income upon the receipt of controlled stock in the third internal distribution sec_355 distributing 4’s basis in the controlled stock immediately following the third internal distribution will equal distributing 4’s basis in the distributing shares exchanged therefor in accordance with sec_1_358-2 sec_358 and c distributing 4’s holding_period in the controlled stock received will include the holding_period of the distributing shares with respect to which the third internal distribution is made provided the distributing stock was held as a capital_asset on the date of the third internal distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1 e except for purposes of sec_355 payments made between any of distributing and controlled and their respective affiliates under any of the continuing arrangements regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period ending on or before the third internal distribution or for a taxable_period beginning before and ending after the third internal distribution and ii will not become fixed and ascertainable until after the third internal distribution will be viewed as occurring before the third internal distribution 344_us_6 revrul_83_73 1983_1_cb_84 sub subs restructuring the deferred busine sec_2 intercompany items will be taken into account as a result of the sub subs restructuring sec_1_1502-13 plr-145256-12 the gain taken into account by each of sub sub and sub in accordance with sec_1_1502-13 will be reflected under sec_1_1502-32 in distributing 4’s basis in controlled immediately before the sub subs restructuring to the extent such gain is allocable i under sec_1_1502-76 to the period before controlled ceases to be a member of the distributing consolidated_group and ii under sec_1 b iii to the period before the sub subs restructuring external distribution the controlled contribution together with the debt-for-debt exchange the debt-for-equity exchange the external distribution and the share repurchase will be a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize gain_or_loss upon the controlled contribution sec_361 a - b and a controlled will not recognize gain_or_loss upon the controlled contribution sec_1032 controlled 3's basis in each of the assets received in the controlled contribution will be equal to the basis of the asset in the hands of distributing immediately before the controlled contribution sec_362 controlled 3's holding_period in each of the assets received in the controlled contribution will include the period during which distributing held such asset sec_1223 distributing will not recognize gain_or_loss upon i the external distribution ii the debt-for-debt exchange and iii the debt-for-equity exchange other than i deductions attributable to the fact that the distributing debt may be redeemed at a premium ii income attributable to the fact that the distributing debt may be redeemed at a discount and iii interest_expense accrued with respect to the distributing debt sec_361 a distributing shareholder will not recognize gain_or_loss and no amount will be includible in such shareholder’s income upon the receipt of controlled stock in the external distribution sec_355 each distributing shareholder’s basis in the controlled stock and the distributing stock immediately following the external distribution will equal the plr-145256-12 basis of the distributing stock that the shareholder held immediately before the external distribution allocated between the stock of distributing and controlled in proportion to their relative fair market values at the time of the external distribution in accordance with sec_1_358-2 sec_358 and c each distributing shareholder’s holding_period in the controlled stock received in the external distribution will include the holding_period of the distributing shares with respect to which the external distribution is made provided the distributing stock was held as a capital_asset on the date of the external distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1 e no portion of the deferred busine sec_1 intercompany items attributable to sub or sub will be accelerated or otherwise taken into account as a result of the external distribution except for purposes of sec_355 payments made between any of distributing and controlled and their respective affiliates under any of the continuing arrangements regarding liabilities indemnities or other obligations that i have arisen or will arise for a taxable_period ending on or before the external distribution or for a taxable_period beginning before and ending after the external distribution and ii will not become fixed and ascertainable until after the external distribution will be viewed as occurring before the external distribution 344_us_6 revrul_83_73 1983_1_cb_84 the earnings_and_profits of controlled to the extent attributable to distributing under sec_1_1248-2 or sec_1_1248-3 whichever is applicable that were accumulated in taxable years of controlled beginning after date and during the period in which controlled was a controlled_foreign_corporation will be attributable to such stock held by controlled sec_1 a closing_agreement in connection with the issuance of this ruling letter a closing_agreement is being entered into between the internal_revenue_service and the taxpayer with respect to certain of those issues affecting its tax_liability on the basis set forth above pursuant to our practice with respect to such agreements the closing_agreement contains a stipulation to the effect that any change or modification of applicable statutes enacted plr-145256-12 subsequent to the date of this agreement and made applicable to the taxable_period involved will render the agreement ineffective to the extent that it is dependent upon such statutes this private_letter_ruling will become effective upon execution of the closing_agreement caveats no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and regulations or on the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular this office has not reviewed any information pertaining to and has made no determination regarding i whether the internal distributions and the external distribution satisfy the business_purpose requirement of sec_1_355-2 ii whether the internal distributions and the external distribution are used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or any controlled_corporation or combination thereof see sec_355 and sec_1_355-2 iii whether the internal distributions and the external distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 iv v vi the federal tax consequences of the proposed transaction under subchapter_k of the code except as expressly provided herein the taxpayer has requested no rulings and no opinion is expressed or implied regarding the federal_income_tax consequences of the sub contribution the internal debt satisfaction the non-busine sec_2 transfers the qualification of the controlled securities as securities for purposes of sec_361 the sub subs conversions the sub llc distribution the dre contribution the dre contribution and the dre equity interests transfer the taxpayer has not represented that distributing has not been a united_states_real_property_holding_corporation as defined in sec_897 at any time during the five-year period ending on the date of the external distribution that distributing will not be a united_states_real_property_holding_corporation immediately after the external distribution or that no foreign_person will hold greater than five percent of the stock of distributing on the date of the external distribution therefore no opinion is expressed regarding the federal_income_tax plr-145256-12 consequences to any greater than five percent foreign shareholder under sec_897 as a result of the external distribution and vii the potential application of final regulations under sec_1248 which were issued on date to the second internal distribution for the potential application of those rules to the second internal distribution see sec_1_1248_f_-1 sec_1_1248_f_-2 and sec_1_1248_f_-3 procedural statements this ruling letter is directed only to the taxpayer 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 any income_tax return to which it is relevant alternatively any taxpayers filing their return electronically may satisfy this requirement by attaching a statement to the return that provides the date and control number of this letter_ruling 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 _a graham magill___________ a graham magill assistant branch chief branch office of associate chief_counsel corporate