tax_exempt_and_government_entities_division number release date date date department of the treasury internal_revenue_service washington d c contact person identification_number contact number uil legend state condominium property dear this is in response to your ruling_request dated date you are requesting certain rulings with respect to the income_tax consequences to you under sec_501 and sec_511 of the internal_revenue_code code of the sale of income_property facts you are a charitable_trust organized under the laws of the state you are exempt under sec_501 as an organization described in sec_501 and are recognized as a private_operating_foundation under sec_4940 your operations include nine children’s centers in state to provide counseling support and education to children and their families caregivers and to help communities strengthen their systems of care available to orphans and destitute children you own over big_number acres of land the majority of which you received by bequest in your trust instrument directs your trustees to use your property for the benefit of orphans and other destitute children in state and directs the trustees to retain and invest a sufficient portion of the trust corpus in income-producing property or securities to provide for the continued maintenance and support of your charitable activities you have maintained the majority of this land to produce rental income to fund your charitable and educational activities in you entered into a master lease for a parcel of land in state with a developer who constructed an apartment building and parking structure and then sublet the apartments in another party acquired the leasehold and subleasehold interests and submitted them along with your interests in the land to a declaration of condominium property to create the current condominium project condominium property the master lease was cancelled and you then entered into a separate land lease with the owner of each unit in the project thereafter you collected rents directly from the condominium_owners you currently own the parcel of land but do not own the condominium units on those lands you are subject_to annual review by a probate_court and the state attorney_general in probate_court reports the court has recommended that you continue to review and evaluate the advantages and disadvantages of diversification of trust assets in light of your mission and goals in response to the recommendations your trustees made significant progress towards the recommended diversification the court appointed special master reports you have made significant progress towards achieving the court recommended goals such as yield on assets particularly in the face of the ongoing market uncertainties and commends you while encouraging you to continue to move forward towards achieving those goals however you state that you have not yet achieved the recommended target asset allocations accordingly your trustees have reexamined your holding of interests in the condominium property the condominium property is located in an area that is at risk of damage from hurricanes and flooding furthermore since construction of the condominium property numerous land reform laws and ordinances have been enacted and you report significant legislative activity for proposed land reform laws which are adverse to lessors existing and proposed laws threaten condemnation or rent control of your leasehold interests including the parcel of land thus while you have traditionally endeavored to retain the land you were bequeathed to produce rental income your trustees have determined that holding your interests in the condominium property is no longer in your best interest you plan to liquidate your interests in the condominium property by selling them to the current leaseholders and to their condominium association you are required by state law to give the association a right_of_first_refusal to purchase any interests in the condominium properties that you offer to sell you plan to offer to sell your interests in parcel of land directly to the condominium property leaseholders and their condominium association your appraiser estimates first year sales of about of units due to historical absorption rates and the balance of the lease to fee conversions occurring over the following fourteen years therefore sales of the condominium property may occur for a period as long as fifteen years you state that your real_estate broker will hold separate information meetings with the leaseholders to describe your leased fee interest in the condominium properties your plans to sell such interests and the process and procedures involved in such sales you state that if you are unable to sell all of your interests in the condominium property to the lessees and condominium associations or through unsolicited offers then you may offer to sell your remaining interests to investment_trust s developer s or other interested investor s or buyer s you state that you do not regularly buy or sell real_property you have from time to time sold other lands that you acquired through your founder’s gift or bequest primarily to government or quasi-government entities for public purposes or in response to mandatory lease-to-fee conversion laws of state or to comply with court recommended financial strategy however you have never sold any of your interests in the condominium property because you own the land on which the condominiums sit but not the condominiums themselves you have neither made nor will make any improvements to any of the condominium property your sales of the leased fee interests in the condominium property will not generate unrelated_business_taxable_income under sec_511 rulings requested your sales of the leased fee interests in the condominium property will not adversely affect your current sec_501 exempt status law sec_511 imposes a tax on the unrelated_business_taxable_income of exempt_organizations including those described in sec_501 sec_512 defines unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less certain allowable deductions both computed with the modifications listed in sec_512 sec_512 excludes from the computation of unrelated_business_taxable_income all gains or losses from the sale exchange or other_disposition of property other than property_held_primarily_for_sale to customers in the ordinary course of a trade_or_business revrul_55_449 1955_5_cb_599 states that the construction and sale of houses by a foundation otherwise exempt under sec_501 over a period of months for the sole purpose of raising funds for the support of a church constituted unrelated_trade_or_business within the meaning of sec_513 because construction and sale of houses is a business of a kind ordinarily carried on for-profit in 383_us_569 86_sct_1030 the supreme court defined the standard to be applied in determining whether property is held primarily_for_sale_to_customers in the ordinary course of business for purposes of sec_1221 the court interpreted the word primarily to mean of first importance or principally in 143_f2d_468 5th cir the taxpayer owned acres of unimproved land used for grazing purposes he decided to sell the land and subdivided it into lots built streets installed storm sewers constructed gas and electric lines and other activities of the kind usually carried out by a real_estate development company each year to lots were sold the court held that the taxpayer was holding lots for sale to customers in the regular course of business in 7_tc_198 the taxpayer purchased platted land to use in his nursery business twelve years later the city built streets through the property that made it less useful for his business even though he made no active sales effort and made no improvements he sold and a half lots in one year the court opined that the sales were essentially made in the nature of a gradual and passive liquidation of an asset and not in the ordinary course of a trade_or_business in 60_tc_996 the tax_court held that a taxpayer who purchased and sold nine parcels of undeveloped land over four years was not engaged in the trade_or_business of buying and selling land for purposes of sec_1221 the taxpayer utilized brokers to aid him in disposing of some of the land however neither he nor the brokers ever sought out or solicited prospective buyers or advertised the properties for sale the court analyzed the following factors in determining that the taxpayer was not engaged in the operation of the trade_or_business of buying and selling land the purpose for which the property was acquired the frequency continuity and size of the sales the activities of the owner in the improvement and disposition of the property the extent of improvements made to the property the proximity of sale to purchase and the purpose for which the property was held in 60_tc_996 and subsequent cases courts have found that no one of these factors is controlling but all are relevant to consider in determining whether the sale of property occurred in the regular course of a taxpayer's trade_or_business see 526_f2d_409 5th cir 606_f2d_77 5th cir 74_tc_187 analysis you received the parcel of land by gift and have held the parcel for more then years in you arranged for the development of this land into condominium property you now desire to liquidate your interests-in this land because of changed circumstances including a lack of liquid_assets to meet the needs of your beneficiaries and otherwise support your charitable and educational activities and existing and future threats of eminent_domain and rent control the information submitted indicates several facts that distinguish your situation from that of a taxpayer that holds property for sale to customers in the ordinary course of a trade_or_business for purposes of sec_512 the land was received by gift and bequest from your founder for the purpose of furthering your charitable activities you have held the land for nearly years and as condominium property for over years as an income-producing investment without selling any of it you have neither made nor will be making any improvements to the properties on the land and you have not advertised your interest in the land for sale to the general_public your facts are distinguishable from those in revrul_55_449 supra in which a foundation constructed and sold houses over a period of months for the sole purpose of raising funds to support a church they are also distinguishable from the facts in 143_f2d_468 5th cir in which a taxpayer subdivided and developed property for the purpose of selling the property then sold lots in acquiring and developing the properties for sale suggested that they were holding the property primarily_for_sale_to_customers in the ordinary course of a trade_or_business in contrast you propose to liquidate assets held for investment purposes as in 7_tc_198 in both of these cases the taxpayers’ efforts accordingly under the primary purpose test of 383_us_569 86_sct_1030 and the facts_and_circumstances_test of 60_tc_996 we conclude that you do not hold your interests in the condominium property primarily_for_sale_to_customers in the ordinary course of a trade_or_business therefore your sale of the interests in the condominium property will not generate unrelated_business_taxable_income under sec_511 and sec_512 and thus will not constitute an excess business holding under sec_4943 and will not adversely affect your exempt status under sec_501 ruling sec_1 your sales of the leased fee interests in the condominium property will not generate unrelated_business_taxable_income under sec_511 your sales of the leased fee interests in the condominium property will not adversely affect your current sec_501 exempt status this ruling is based on the understanding that there will be no material_change in the facts upon which it is based any changes that may have a bearing on your tax status should be reported to the service this ruling does not address the applicability of any section or regulations to the facts submitted other than with respect to the sections described this ruling will be made available for public inspection under sec_6110 after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 provides that it may not be used or cited by others as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely theodore r lieber manager exempt_organizations technical group enclosure notice cc


internal_revenue_service number release date index number ------------------------------ ------------------------------ --------------------------------------------------- --------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-132310-05 date date ---------- ------------------------- ------------------------- ------------------------------ ----------------------- legend x state d1 d2 dear --------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a partnership for federal_income_tax purposes facts based upon the information submitted and representations made within your request x was formed as a state limited_liability_company on d1 x elected to be treated as an association_taxable_as_a_corporation for federal tax purposes effective on d1 on d2 x intended to elect to be classified as a partnership for federal tax purposes however a form_8832 entity classification election electing to be treated as a partnership was not timely filed plr-132310-05 law and analysis sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 further provides that an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership sec_301_7701-3 provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides that unless the entity elects otherwise a domestic eligible_entity is a partnership if it has two or more members sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing a form_8832 with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_7701-3 provides in relevant part that if an eligible_entity makes an election under sec_301_7701-3 to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however an election by a newly formed eligible_entity that is effective on the date of formation is not considered a change for purposes of this paragraph under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-132310-05 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of sixty days from the date of this letter to elect to be classified as a partnership for federal_income_tax purposes effective d2 the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes cc heather maloy heather maloy associate chief_counsel passthroughs and special industries sincerely


of f i c e of c h i ef c ou n sel number info release date genin-119910-09 department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date ------------------------ ----------------------- --------------------------- uil dear ----- ---------- thank you for your letter received date to commissioner shulman regarding the tax consequences to victims of the investment fraud mr bernard l madoff perpetrated on date we issued guidance revrul_2009_9 and revproc_2009_20 on the tax treatment of losses from so-called ponzi schemes similar to that mr madoff operated i am enclosing copies for your information revrul_2009_9 explains the income_tax law that applies to an investor who loses money in a fraudulent investment arrangement it provides that an investor who was the victim of a fraudulent investment arrangement is entitled to a theft_loss deduction that is not limited by the rules that apply to capital losses investment theft losses are not subject_to limitations that apply to personal casualty and theft losses the theft_loss is deductible in the year the fraud is discovered except to the extent the investor has a reasonable_prospect_of_recovery the amount of the theft_loss includes not only the investor's unrecovered investment but also amounts reported as income from the investment in prior years and reinvested in the fraudulent investment arrangement a theft_loss deduction that creates a net_operating_loss for the investor can be carried back and forward according to the timeframes prescribed by law to generate a refund of taxes paid in other taxable years genin-119910-09 to claim a theft_loss deduction in any taxable_year an investor must prove that the loss was due to theft and that no reasonable prospect exists of recovering the investment investors often cannot make highly factual determinations with certainty in the year the loss is discovered for this reason we published revproc_2009_20 to provide a simplified_method for investors to compute and report their losses from fraudulent investment schemes this revenue_procedure generally allows an investor who was a victim of mr madoff’s fraud to claim a theft_loss in the amount the investor may deduct is up to percent of the loss less the amount of reimbursement he or she expects to receive as an advance for customer claims from the securities investor protection corporation sipc or from private insurance or other contractual arrangements that guarantee the investor against loss i hope this information is helpful please call me at ---------------------if i can further assist you sincerely john p moriarty chief branch office of associate chief_counsel income_tax and accounting enclosures


internal_revenue_service number release date index number ------------------------------------------- --------------------------------------------------- -------------------------------- in re --------------------------------------------------- --------------------------------------------------------- ----------------------- ein ---------------- 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 ita b02 plr-128134-10 date date ty --------------------------- legend -------------------------------------------------------------- ------------------- ---------------------- ---------------------- ---------------------- ------------------------- ------------------- -------------- ---------------------- ------- ------- ------- ------- ------- ------- ------- ------- taxpayer date date date date date date date date year year year year year year year year e ----------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------- f ------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- plr-128134-10 ----------------------------------------------------------- ---------- -------------------------------------------------- -------------------------------- ------------------------- ----------------------- ---------------- -------------------- -------------- -------------- -------------- ---------------- -------------- -------------- -------------------------- ----------------------------------------- -------------------------------------- -------- ---------------------------------------------- ------------------- ------------------------ state company account x individual a individual b individual c individual d x percent amount amount amount loan x entity r entity u entity v entity z s t firm w dear -------------- this is in response to your letter dated date and amended letters dated date date date and date filed on behalf of the above-named taxpayer in which you request the following rulings taxpayer is the qualified investor for purposes of claiming a theft_loss deduction under dollar_figure of revproc_2009_20 2009_14_irb_749 the discovery year as defined in dollar_figure of revproc_2009_20 is year facts taxpayer was formed as a limited_liability_company in year in the state of state and has filed as a partnership for federal tax purposes since its formation it is represented that taxpayer was formed to conduct legitimate business activities involving e taxpayer sold its membership interests to investors and used the funds generated through the sale of membership interests to invest in loans originated by company taxpayer offered its investors a flow-through of profits generated through the investments in the company loans company maintained a bank account known as the account x to collect loan payments from borrowers that company would eventually pay plr-128134-10 to direct investors including taxpayer during taxpayer’s entire existence it participated in legitimate business activities such as f in year some of company’s loans began to default individual a president of company from year until date and individual b chairman and ceo of company from year until date the lead figures concealed from investors that loans were not performing and caused company to continue to pay interest to investors regardless of whether the underlying borrowers had made loan payments to the account x as a result the account x had insufficient funds to make payments to all of its investors and individuals a and b began to look for sources of money to cover the shortage in the account x one of the ways individuals a and b covered the shortage was by not remitting principal payments to investors when borrowers paid off the loans individuals a and b made it appear as if the loans were still performing by paying the investors an amount calculated as if the borrowers had made only interest payments on the loans individuals a and b also funded the shortage in the account x with money collected from new investors and by withholding payments from the account x owed to taxpayer by the end of year individuals a and b had used more than amount of taxpayer’s funds to make payments to other company investors on non-performing loans in year individuals a and b who controlled_taxpayer through several tiered entities from its formation until date caused taxpayer to create a fraudulent loan known as the loan x individual a directed a broker individual c to form two entities entity r and entity u for the sole purpose of extracting money from taxpayer to fund the private developments and other investment projects of individuals a and b entity r was the purported borrower in the loan x transaction and it funneled most of the loan proceeds to entity u which then transferred the proceeds to entity v an entity in which individuals a and b held x percent of the ownership interests both entity r and entity u served as conduits with no legitimate business_purpose through which individuals a and b shifted taxpayer’s money to entity v individuals a and b concealed the loan x from taxpayer’s investors until year by date individuals a and b had caused taxpayer to transfer approximately amount in principal to the loan x through these actions individuals a and b defrauded taxpayer of its property and caused taxpayer’s funds to be misappropriated taxpayer continued to sell membership interests until date and allowed investors to reinvest their distributions until around date as of date taxpayer had about s investors and had raised approximately amount from investors there is no indication that any of taxpayer’s partners other than entity z and entity v partners managed by individuals a and b had any knowledge of fraudulent conduct by individuals a and b prior to it becoming known to the general_public individuals a and b were the managers of two entities entity z and entity v that invested in taxpayer entity z was the manager of taxpayer and entity v was the manager of entity z taxpayer’s operating_agreement required its manager to contribute to the capital of taxpayer as the initial member besides plr-128134-10 on date company and taxpayer filed for bankruptcy as of the bankruptcy filing_date taxpayer had various legitimate note receivables from unrelated third parties taxpayer emerged from bankruptcy according to a confirmed plan_of_reorganization in year and pursuant to taxpayer’s amended operating_agreement approved as part of the plan confirmation individual d of firm became taxpayer’s new manager since the plan confirmation taxpayer has been liquidating the estate pursuing causes of action and distributing proceeds to taxpayer’s investors in year the united_states attorney for w filed a criminal information against individual a charging him with one count of t and he pled guilty to the charge representations taxpayer represented the following taxpayer satisfies the requirements for a specified fraudulent arrangement and a qualified loss under dollar_figure and dollar_figure of revproc_2009_20 and the fraudulent arrangement did not have a purpose of avoiding or evading taxes law analysis sec_165 of the internal_revenue_code allows a deduction for losses sustained during the taxable_year and not compensated by insurance or otherwise a loss arising from criminal_fraud or embezzlement in a transaction entered into for profit is a theft_loss not a capital_loss under sec_165 revrul_2009_9 2009_14_irb_735 for federal_income_tax purposes theft is a word of general and broad connotation covering any criminal appropriation of another’s property to the use of the taker including theft by swindling false pretenses and any other form of guile 232_f2d_107 5th cir see also sec_1_165-8 of the income_tax regulations a taxpayer claiming a theft_loss must prove that the loss resulted from a taking of property that was illegal under the law of the jurisdiction in which it occurred and was done with criminal intent revrul_72_112 1972_1_cb_60 sec_165 states that any loss arising from theft shall be treated as sustained in the taxable_year the taxpayer discovers the loss under sec_1_165-8 and sec_1_165-1 however if in the year of discovery there exists a claim for reimbursement with respect to which there is a reasonable_prospect_of_recovery no portion of the loss for which reimbursement may be received is sustained until the taxable_year in which it can be ascertained with reasonable certainty whether or not the reimbursement will be received whether a reasonable_prospect_of_recovery exists is a question of fact to be determined upon examination of all facts and circumstances individuals a and b taxpayer is not aware of any employees or directors of company entity z or entity v that had knowledge prior to the bankruptcy petition date of fraudulent activities by individuals a and b plr-128134-10 revproc_2009_20 provides an optional safe_harbor treatment for qualified investors that experience losses in certain investment arrangements discovered to be criminally fraudulent revproc_2009_20 applies to losses for which the discovery year as defined in dollar_figure of revproc_2009_20 is a taxable_year beginning after date section dollar_figure of revproc_2009_20 provides that if a qualified investor follows the procedures described in revproc_2009_20 the service will not challenge the following treatment by the qualified investor of a qualified loss the loss is deducted as a theft_loss the taxable_year in which the theft was discovered within the meaning of sec_165 is the discovery year described in the revenue_procedure and the amount of the deduction is the amount specified in the revenue_procedure section dollar_figure of revproc_2009_20 defines a qualified investor as a united_states_person as defined in sec_7701 - that generally qualifies to deduct theft losses under sec_165 and sec_1_165-8 that did not have actual knowledge of the fraudulent nature of the investment arrangement prior to it becoming known to the general_public with respect to which the specified fraudulent arrangement is not a tax_shelter as defined in sec_6662 and that transferred cash or property to a specified fraudulent arrangement a qualified investor does not include a person that invested solely in a fund or other entity separate from the investor for federal_income_tax purposes that invested in the specified fraudulent arrangement however the fund or entity itself may be a qualified investor within the scope of the revenue_procedure sec_7701 provides that the term united_states_person includes a domestic_partnership section dollar_figure of revproc_2009_20 defines a specified fraudulent arrangement as an arrangement in which a party the lead figure receives cash or property from investors purports to earn income from investors reports income amounts to the investors that are partially or wholly fictitious makes payments if any of purported income or principal to some investors from amounts that other investors invested in the fraudulent arrangement and appropriates some or all of the investors’ cash or property section dollar_figure of revproc_2009_20 defines a qualified loss as a loss resulting from a specified fraudulent arrangement in which as a result of the conduct that caused the loss - plr-128134-10 the lead figure or one of the lead figures if more than one was charged by indictment or information not withdrawn or dismissed under state or federal_law with the commission of fraud embezzlement or a similar crime that if proven would meet the definition of theft for purposes of sec_165 and sec_1_165-8 under the law of the jurisdiction in which the theft occurred or the lead figure was the subject of a state or federal criminal complaint not withdrawn or dismissed alleging the commission of a crime described in sec_4 of this revenue_procedure and either - a the complaint alleged an admission by the lead figure or the execution of an affidavit by that person admitting the crime or b a receiver or trustee was appointed with respect to the arrangement or assets of the arrangement were frozen section dollar_figure of revproc_2009_20 states that a qualified investor’s discovery year is the taxable_year of the investor in which the indictment information or complaint described in the definition of qualified loss under dollar_figure is filed issue is taxpayer the qualified investor for purposes of claiming a theft_loss deduction under rev_proc taxpayer satisfies the requirements for a qualified investor under dollar_figure of rev_proc taxpayer is a united_states_person as defined in sec_7701 that generally qualifies to deduct theft losses under sec_165 and sec_1_165-8 there is no indication that the partners other than two partners managed by individuals a and b had any knowledge of fraudulent conduct by individuals a and b prior to it becoming known to the general_public taxpayer represented that the specified fraudulent arrangement was not a tax_shelter as defined in sec_6662 and individuals a and b through the loan x and by withholding payments owed to taxpayer caused taxpayer to transfer money to a specified fraudulent arrangement issue is year the discovery year as defined in dollar_figure of rev_proc taxpayer’s discovery year for purposes of revproc_2009_20 is the taxable_year in which the information described in the qualified loss requirements under dollar_figure is filed based on the criminal information filed by the united_states attorney for w against individual a one of the lead figures in year and taxpayer’s representation that it satisfies the requirements of a qualified loss under sec_4 taxpayer’s discovery year for purposes of revproc_2009_20 is year conclusion plr-128134-10 based on the information submitted and representations made we conclude that taxpayer is the qualified investor for purposes of claiming a theft_loss deduction under revproc_2009_20 the discovery year for purposes of claiming a theft_loss deduction under revproc_2009_20 is year this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative please attach a copy of this letter_ruling to the federal_income_tax return for the taxable_year in which the taxpayer claims the theft_loss deduction the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a statement executed under penalties of perjury by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this letter_ruling is limited to the matters specifically addressed no opinion is expressed as to whether taxpayer has satisfied the other requirements for claiming a theft_loss under revproc_2009_20 sincerely norma c rotunno senior technician reviewer branch income_tax accounting cc


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-139870-05 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities --------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its ----------------------- opinion that the following business upon reconsideration is not a covered employer under the railroad retirement act and the railroad unemployment insurance act effective --------------------- ------------------------------------------------ ---------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that -------------------------- is not a covered employer under the railroad_retirement_tax_act effective --------------------- please take the appropriate action regarding this business _____________________________ janine cook


cca_2017092510151943 id uilc number release date from sent monday date am to cc bcc subject re disaster for huricanes in florida hi -------- sec_7508a would suspend the time for making assessments for the postponement time that applies to this disaster there are some examples in the regs under that section i’ve cc’d ----------------who is much more knowledgeable on disaster relief than i am thanks- ------- ---------------- ---------------------- -------------- --------------------------------


internal_revenue_service number release date index number ------------------ ------------- ------------------------------------------------- ----------------------------- ------------------------------- in re ------------------------------------------------- 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 bo1 plr-135046-05 date december ------------------------------------------------- ---------------------- legend distributing -------------------------------------------------------------- ---------------------------------------------------------- controlled ------------------------------------------------------------------- ---------------------------------------------------------- sub a-1 sub a-2 sub a-3 entity a-4 sub b-1 sub b-2 sub b-3 -------------------------------- --------------------------------- ------------------------------------ -------------------------------------- sub b-4 sub c-1 ------------------------------------- -------------------------------- -------------------------------------------------- ------------------------------------------------- -------------------------------------------------------- ------------------------------- --------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------- ----------------------- ------------------------- -------------------------- -------------------------------- ------------------------------------- ---------------------------------------------------- plr-135046-05 sub c-2 sub c-3 company ----------------------------------------------------------------------------------------------------------------- company ------------------------------------------------------------------------------------- entity a-5 business a business b business c business d k l m n o p r s t v w-1 w-2 w-3 -------------------------------- ----------------------------- --------------------- ------------------- ------------------ ----------------- -------------- ------------ ------------ ------------ ------------ ----- --- --------------------- --------------------- --------------------- ----------------------------------------------------- ----------------------------------------------------- this letter replies to your letter of date submitted on behalf of plr-135046-05 investor x investor y date date date dear ------------ distributing requesting rulings as to certain federal_income_tax consequences of a proposed transaction the following is a summary of the information in your letter and subsequent correspondence 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 no information provided by the taxpayer has been reviewed and no determination has been made regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 summary of facts distributing is the common parent_corporation of a consolidated_group of corporations engaged in businesses a b and c distributing directly owns all of the stock of sub a-1 sub b-1 sub b-2 and sub c-1 sub a-1 owns all of the stock of sub a-2 sub a-2 owns all the stock of sub a-3 and all the membership interests in entity a-4 which is treated for federal_income_tax purposes as an entity disregarded from its owner sub a-2 sub a-2 and entity a-4 actively conduct business a sub b-2 owns all of the stock of sub b-3 which in turn owns all of the stock of sub b-4 sub c-1 owns all of the stock of sub c-2 which in turn owns all of the stock of sub c-3 sub c-3 actively conducts business d which is a part of business c ii sub b-3 distributed the b-4 note to sub b-2 controlled has recently been incorporated for purposes of the proposed distributing has decided to separate business c from businesses a and b by i sub b-4 distributed to sub b-3 a long-term promissory note in the amount of plr-135046-05 transaction controlled has one class of common_stock distributing controlled and its subsidiaries engaged in business c to its shareholders pro_rata at the same time distributing plans to have an initial_public_offering of about s percent of the stock of sub b-3 and it may pay a special dividend to distributing shareholders or repurchase distributing stock distributing also plans to realign foreign entities engaged in businesses a b and c with the domestic parts of those businesses engaged in by distributing sub b-3 and controlled the international restructuring no rulings are requested regarding the international restructuring the following steps are proposed or have been recently consummated steps xi through xviii may occur prior to or on a parallel track with steps iv through x approximately k dollars the b-4 note vi distributing will create entity a-5 a limited_liability_company that will be an entity disregarded from its sole owner distributing then sub a-1 will be merged into entity a-5 with entity a-5 surviving b-2 in exchange for common_stock of sub b-2 for common_stock of sub b-2 exchange for stock of sub b-3 exchange for common_stock of sub b-4 vii entity a-5 will contribute assets used in business b the b assets to sub ix sub b-2 will contribute the b assets and the stock of sub b-1 to sub b-3 in viii distributing will contribute all the stock of sub b-1 to sub b-2 in exchange x sub b-3 will contribute the b assets and the stock of sub b-1 to sub b-4 in iv sub a-3 will be merged upstream into sub a-2 with sub a-2 surviving v sub a-2 will be merged upstream into sub a-1 with sub a-1 surviving xi distributing has formed controlled as a wholly owned subsidiary iii sub b-2 distributed the b-4 note to distributing xii controlled has formed or will form company as a wholly owned xv distributing and investor x will form company initially distributing will xiii sub c-3 will merge with company with company surviving sub c-2 xiv distributing will contribute approximately l dollars to sub c-1 by canceling plr-135046-05 subsidiary will receive common_stock of company with an aggregate fair_market_value approximately equal to the net fair_market_value of sub c-3 indebtedness owed to distributing by sub c-1 receive the initial common_stock of company in exchange for a contribution of approximately m dollars and investor x will receive all the voting preferred_stock of company with a liquidation preference of approximately o dollars in exchange for a contribution of approximately p dollars the company voting preferred_stock xvi contemporaneously with or immediately after step xv distributing will transfer all the outstanding_stock of sub c-1 to company in exchange for common_stock of company and nonvoting preferred_stock of company with a liquidation preference of approximately r dollars the c-1 exchange distributing will immediately sell the nonvoting preferred_stock of company to a third-party investor s investor y pursuant to a pre-existing binding commitment entered into before distributing’s transfer of sub c-1 stock to company the prearranged sale investor y will not transfer any property to company in connection with any of the proposed transactions distributing expects to recognize a substantial tax loss in connection with this transaction the sub c-1 loss controlled in exchange for common_stock of controlled the company contribution company in exchange for company common_stock trusts including a rabbi_trust established for the benefit of n the n rabbi_trust that hold distributing common_stock distributing will distribute all outstanding controlled stock more than percent pro_rata to the holders of distributing common_stock at a ratio of one share of controlled common_stock to each eight shares of distributing common_stock the distribution distributing will not distribute fractional shares of controlled stock instead a distribution agent will aggregate fractional shares of controlled stock sell them on the open market and distribute the net_proceeds of the sale to beneficial owners of distributing stock who otherwise would have received the controlled fractional shares holders of restricted distributing stock will receive unrestricted controlled stock xix except for controlled stock that will be received by distributing’s rabbi xvii distributing will contribute all of the common_stock of company to xviii controlled will contribute all of the common_stock of company to xx sub b-3 will sell approximately s percent of its stock in an initial public xxi it is expected that sub c-1 will borrow approximately t dollars from third plr-135046-05 offering the business b ipo sub b-3 will contribute the net ipo proceeds to sub b- and sub b-4 and its subsidiaries will use these proceeds to repay any indebtedness owed to distributing other than the b-4 note the old b-4 debt if there is any outstanding balance remaining on any of the old b-4 debt after this repayment this remaining balance will be cancelled the b-4 note will remain outstanding after the business b ipo party lenders around the time of the distribution the net_proceeds of this borrowing plus the net_proceeds from the issuance of the company voting preferred_stock which will be contributed to sub c-1 by company will be used by sub c-1 to repay debt owed to distributing to support certain letter_of_credit arrangements with respect to sub c-1’s ongoing business and for general corporate purposes including working_capital potential acquisitions and stock repurchases stock repurchase distributing shares or do both it is expected that distributing will borrow from third party lenders at such times and in such amounts as distributing determines to be appropriate in order to fund any share repurchases or special dividends xxii distributing may pay a special dividend to holders of distributing common representations b no part of the consideration to be distributed by distributing in the a the indebtedness if any owed by controlled to distributing after the the following representations have been submitted in connection with the proposed transaction distribution will not constitute stock_or_securities distribution will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing except for shares of controlled common_stock received by holders of restricted distributing common_stock granted pursuant to a stock incentive plan of distributing distribution by distributing’s rabbi trusts other than the n rabbi_trust that were established for the payment of benefits under distributing’s executive pension and deferred_compensation plans and that hold shares of distributing common_stock the rabbi trusts and such controlled common_stock the retained rabbi_trust controlled stock this disposition will occur as soon as a disposition is warranted consistent with the business_purpose for the retention of the retained rabbi_trust controlled stock by distributing through its rabbi trusts the retention but in any event not more than five years after the distribution c distributing will dispose_of the controlled common_stock received in the d in connection with a representation agreement with individual n the plr-135046-05 representation agreement the n rabbi_trust was established for the benefit of n the n rabbi_trust will receive in the distribution controlled stock with respect to the n rabbi trust’s shares of distributing stock this distributing and controlled stock will vest on date the date distributing stock and date controlled stock n will also directly receive controlled stock with respect to distributing stock that vested on date the date distributing stock and date controlled stock n may sell the date distributing stock and date controlled stock to distributing on date at a fixed price and may sell the date distributing stock and date controlled stock to distributing on date for a fixed price under the representation agreement the date distributing stock and date controlled stock will be retained by the n rabbi_trust until date this controlled stock the retained n rabbi_trust controlled stock and the retention of this stock the n retention at which time it will vest if certain conditions in the representation agreement are satisfied to the extent that the retained n rabbi_trust controlled stock does not vest on date or distributing receives either the date controlled stock or the date controlled stock pursuant to n’s exercise of n’s right to sell the stock to distributing at a fixed price such stock described in clause if any the acquired n rabbi_trust controlled stock and such acquisition described in clause if any the n acquisition distributing will dispose_of the retained n rabbi_trust controlled stock or the acquired n rabbi_trust controlled stock as soon as a disposition is warranted consistent with the business_purpose for the n retention or the n acquisition but in any event not later than five years after the distribution be voted in proportion to the votes cast by other shareholders of controlled properly treated as a grantor_trust pursuant to sec_671 at all times since its formation of the gross assets of controlled will consist of the stock and securities of a controlled_corporation company that is engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 representative of the present operations of business a conducted by sub a-2 and entity a-4 and with regard to such business there have been no substantial operational changes since the date of the last financial statement submitted representative of the present operations of business d a part of business c and with regard to such business there have been no substantial operational changes since the date of the last financial statement submitted g immediately after the distribution at least percent of the fair_market_value e the controlled stock retained by the rabbi trusts and the n rabbi_trust will h the years of financial information submitted on behalf of distributing is i the years of financial information submitted on behalf of company is f each of distributing’s rabbi trusts including the n rabbi_trust has been k the distribution is carried out for the following corporate business purposes j following the distribution distributing and controlled directly or through their plr-135046-05 respective controlled_subsidiaries will continue the active_conduct of their respective businesses independently and with their separate employees i to enhance the success of both distributing and controlled by enabling them to resolve management and systemic problems that arise by the operation of their businesses within a single affiliated_group ii to improve the competitiveness of controlled’s business c by resolving inherent conflicts and the appearance of conflicts with v iii to simplify and reduce distributing’s and controlled’s regulatory compliance burdens and risks by separating business c from distributing iv to enhance the ability of each of distributing and controlled to issue equity efficiently and effectively for acquisitions and financings and v to enhance the efficiency and effectiveness of distributing’s and controlled’s equity-based compensation the distribution is motivated in whole or substantial part by one or more of these corporate business purposes l there is no plan or intention by any five_percent_shareholder of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any specific other shareholder of distributing other than index funds which will presumably readjust their portfolios consistent with the relevant indices to sell exchange transfer by gift or otherwise dispose_of its stock in either distributing or controlled after the distribution m there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the distribution other than distributing’s acquisition of the acquired n rabbi_trust controlled stock together with any similar acquisition of date distributing stock or date distributing stock or through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 merge distributing or controlled with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the distribution except in the ordinary course of business however distributing or controlled or existing or newly formed subsidiaries of distributing or controlled may seek to acquire related businesses after the distribution and some of those acquisitions may be structured as mergers earnings_and_profits of distributing or controlled or both neither accumulated their receivables nor made extraordinary payment of their payables in anticipation of the distribution p except for the payment of any special dividends distributing and controlled o the distribution is not used principally as a device for the distribution of the n there is no plan or intention to liquidate either distributing or controlled to r except for any outstanding indebtedness owed to distributing by sub c-1 that t except for certain payments that will be made in connection with the tax s immediately before the distribution items of income gain loss deduction q except for distributing’s capitalization of indebtedness owing to distributing plr-135046-05 by sub c-1 as described in transaction step xiv no indebtedness between distributing and its subsidiaries and controlled and its subsidiaries has been or will be cancelled in connection with the distribution will be repaid as described in transaction step xxi no intercorporate debt will exist between distributing and its subsidiaries and controlled and its subsidiaries at the time of or subsequent to the distribution 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_32_irb_6 and as currently in effect sec_1_1502-13 as published by t d further distributing’s excess_loss_account if any with respect to controlled stock will be included in income immediately before the distribution to the extent required by applicable treasury regulations see sec_1 sharing_agreement and certain transitional agreements payments made in connection with continuing transactions if any between distributing and its subsidiaries and controlled and its subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length sec_368 and iv determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution u no two parties to the transaction are investment companies as defined in w for purposes of sec_355 immediately after the distribution no person v for purposes of sec_355 immediately after the distribution no person bb the distribution would be pursued by distributing regardless of whether the aa no liabilities were directly assumed by controlled in the company z at the time of the company contribution the outstanding common_stock of plr-135046-05 x the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including a predecessor or successor of any such corporation y after the distribution no director officer or key_employee of distributing or any of its subsidiaries will be a director officer or key_employee of controlled or any of its subsidiaries other than individuals w-1 w-2 and w-3 who will serve as officers and directors of distributing and as directors of controlled and potentially company company will have a positive net fair_market_value contribution sub c-1 loss would be recognized by virtue of the distribution and the related transactions sale of the sub c-1 stock to an unrelated third party controlled_group as defined in sec_267 upon the consummation of the distribution engaged in or structured with a principal purpose to avoid the provisions of sec_267 including for example by avoiding treatment as an intercompany sale or by distorting the timing of losses or deductions within the meaning of sec_1_267_f_-1 principal purpose of which is evasion or avoidance of federal_income_tax within the meaning of sec_269 by the distribution agent will be solely for the purpose of avoiding the expense and inconvenience of issuing and maintaining fractional shares and will not represent separately bargained for consideration the total cash that will be paid in connection with the distribution in lieu of fractional shares of controlled common_stock will not exceed one percent of the total consideration that will be distributed in the distribution it is intended that no distributing shareholder will receive cash in lieu of fractional cc distributing would be entitled to recognize the sub c-1 loss upon a taxable ee the distribution of business c to shareholders of distributing is not being dd distributing and company will cease to be members of the same ff the c-1 exchange is not an acquisition described in sec_269 or a the gg the payment of cash in lieu of fractional shares of controlled common_stock plr-135046-05 shares in an amount equal to or greater than the value of one full share of controlled common_stock rulings distributing will recognize the sub c-1 loss on the c-1 exchange provided it based solely on the information submitted and the representations set forth above we rule as follows is followed by the prearranged sale sec_1001 and revrul_79_70 c b loss recognized on the c-1 exchange sec_267 and sec_1_267_f_-1 immediately before the distribution distributing will take into account the the company contribution together with the distribution will be a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization under sec_368 distributing will recognize no gain_or_loss on the company contribution sec_361 sec_1032 controlled will recognize no gain_or_loss on the company contribution controlled’s basis in the stock of company received in the company contribution will equal the basis of such stock in the hands of distributing sec_362 controlled’s holding_period in the stock of company received in the company contribution will include the holding_period of that asset in the hands of distributing sec_1223 distributing will recognize no gain_or_loss on the distribution sec_361 the shareholders of distributing will recognize no gain_or_loss and no amount will otherwise be included in the income of such shareholders on their receipt of controlled stock in the distribution except for holders of restricted_stock of distributing who have not made a valid election under sec_83 sec_355 the aggregate basis of the distributing and controlled stock in the hands of a shareholder of distributing after the distribution including fractional shares aggregated and sold by the distribution agent will equal the shareholder’s basis in the distributing stock held immediately before the distribution allocated between the distributing stock and controlled stock in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 b and c plr-135046-05 the holding_period of the controlled stock received by a shareholder of distributing will include the holding_period of the distributing stock on which the distribution is made provided that the distributing stock is held as a capital_asset on the date of the distribution sec_1223 distributing and controlled will allocate earnings_and_profits if any in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 none of the retention the n retention or the n acquisition if any is in pursuance of a plan having as one of its principal purposes the avoidance of federal_income_tax sec_355 a shareholder who receives cash in lieu of fractional shares of controlled stock will recognize gain_or_loss measured by the difference between the basis of the fractional shares received as determined above in ruling and the amount of cash received sec_1001 any gain_or_loss will be treated as capital_gain or loss provided the fractional shares of stock would be held as capital assets on the date of the distribution sec_1221 and sec_1222 caveats no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or regulations or 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 no opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the proposed transaction is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 and sec_1_355-2 and iii whether the distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 in addition no opinion is expressed regarding iv the tax treatment of the receipt of unrestricted controlled stock by holders of restricted distributing stock who have not made valid elections under sec_83 v the potential application of sec_482 to any payments made in connection with continuing transactions between distributing and its subsidiaries and controlled and its subsidiaries that are not made for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length and iv the tax treatment of the international restructuring procedural statements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-135046-05 each taxpayer involved in the transaction should attach a copy of this ruling letter to the taxpayer's federal_income_tax return for the taxable_year in which the transaction covered by this letter is completed under a power_of_attorney on file in this office copies of this letter are being sent to your authorized representatives sincerely ______________________________ lisa a fuller senior counsel branch office of associate chief_counsel corporate cc


internal_revenue_service number release date index number ------------------------ ------------------------------ ------------------------------- -------------------------------- ---------------- ------------------------------------ - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc corp b03 plr-130442-06 date december target sub sub ----------------------- --------------------------------------------------------------------------------- -------------- --------------------------------------- --------------------------------------------------------------------------------- -------------- ------------------------------- --------------------------------------------------------------------------------- -------------- ---------------------------------- ------------------------------------ target sub --------------------------------------------------------------------------- ------------------------------------------------------------ target sub ------------------------------------------------------------------- ------------------------------------------------------------ target sub ----------------------------- ------------------------------------------------------------------- ------------------------------------------------------------ target sub ----------------------------------------------------------------- ------------------------------------------------------------ ---------------------------------- plr-130442-06 joint_venture ----------------------------------------------------------------------------------------- joint_venture ---------------------------- company a company a sub company a sub company b ---------------------------------- --------------------------------------------------------------------------------- -------------- ------------ --------------------------------------------------------------------------------- --------------------------- ------------------------------ ---------------------------------------------------------------------------- ------------------------ --------------------------------------------------------------------------------- ----------- ------------------------------------ ---------------------------------------------------------------------------- -------------------------------------- ------------------------------------------ -------------------------------------------- acquiring ----------------------------------------------------------------- ----------------------------------------------------------- pension_plan pension trustee country a country b country c country d region a business --------------------- ------------------- ----------- ---------- -------- ------------------------------------------------------ --------------------------------------------------------------------------------- ---------------- ------------------ ------------------- ----------------------- ---------------------- -- -------------------------- --------------------------- -------------------------------- plr-130442-06 exchange bankruptcy court ---------------------------------------------------------------------------------------------------------------- date date date date date date date date date date date date year year year a b c d ------------------------------------------------------ ------------------------ --- -------------------- --- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ------- ------- ------- plr-130442-06 e f g h i j k l m n o p q r s t u v w x y z ---------------------------------- ---------------------------------- ---------------------------------- -------------------------------- ---------------------------------- ---------------------------------- ----------------------------------- ------------------------- -------- ---------------------------------- -------------------------------- -- --------- --------- --------- --------------------------------- ---------------------------------- --------------------------------- --------------------------------- --------- --------- --------- -------- ---- ------- --------- --------- ------------ --------------- ----------------- ------------------------------ -------------------------------- -------------------------------- ---------------------------- ----- plr-130442-06 aa bb cc dd ee ff gg hh ii kk dear --------------- we respond to your date request for rulings on certain federal_income_tax consequences of a completed transaction the completed transaction additional information was submitted on date and date the information provided in the request and later correspondence is summarized below and country b the stock of target was publicly traded on the exchange target acted as a holding_company and was engaged in business through subsidiaries and corporate joint ventures under the laws of country a and country b and an entity disregarded as separate from its owner for u s federal_income_tax purposes target also owned all the stock of sub a private limited_company that was incorporated under the laws of country a and country b sub owned all the stock of target sub a domestic_corporation and the common parent of an affiliated_group_of_corporations that joined together in filing a consolidated u s federal_income_tax return old target consolidated_group the old target consolidated group’s taxable_year end was date and each member of the old target consolidated_group was an accrual basis taxpayer for u s federal_income_tax target was a public limited_company incorporated under the laws of country a target owned all the stock of sub a private limited_company incorporated plr-130442-06 purposes members of the old target consolidated_group were target sub 1's wholly owned subsidiary target sub which owned all of the stock of target sub which owned all the stock of target sub target sub was directly and indirectly engaged in business in region a company a a publicly traded corporation formed under the laws of country c was target’s largest single shareholder owning a percent of the stock of target company a also owned all of the stock of company a sub incorporated under the laws of country a and country b and company a sub incorporated under the laws of country c target and company a sub entered into a joint_venture and each held b immediately prior to the completed transaction as described below the percent of the stock of joint_venture target also entered into a joint_venture with company b an unrelated corporation incorporated under the laws of countries a and b target held c percent of joint_venture and company b held d percent obligations of target and its affiliates to third parties totaled dollar_figuree target’s indebtedness consisted of dollar_figuref of secured debt financing existing senior facilities from various third party banks bank lenders the existing senior facilities were split into four tranches target was the borrower on the first three tranches which totaled dollar_figureg target sub was the borrower on the fourth tranche which totaled dollar_figureh the existing senior facilities were secured_by substantially_all of target’s assets except target’s investment in joint_venture target also issued dollar_figurei of fixed rate unsecured convertible loan notes loan notes to company a sub target also had a dollar_figurej liability to its pension_plan target administered the pension_plan for the benefit of its country d employees the pension trustee was the sole trustee of the pension_plan in addition obligations existed among target and certain of its affiliates target owed dollar_figurek to sub and target owed dollar_figureh to target sub target sub also owed dollar_figurel to sub pursuant to a share subscription agreement beginning in year target experienced financial difficulties also on date target lost its entire investment in joint_venture by year target was unable to meet its existing financial obligations and target’s liabilities exceeded the fair_market_value of its assets immediately before the completed transaction target had two assets with value the stock of target sub with a fair_market_value of dollar_figurem and joint_venture with a fair_market_value of dollar_figuren on date target was delisted from the exchange_agreement with its creditors to restructure by forming a new corporation acquiring and as part of a voluntary reorganization under country d law target reached an plr-130442-06 transferring target’s assets to acquiring in exchange for acquiring stock and distributing acquiring stock in exchange for target’s outstanding debt obligations to bank lenders and to company a sub thus the following steps of the completed transaction were undertaken i on date target formed acquiring ii on date target and company a sub modified the loan notes to permit conversion of the loan notes into common shares of target stock or preferred shares of acquiring at the option of the holder company a sub also agreed to waive the interest outstanding on the loan notes iii on date sub transferred all of the stock of target sub to target for dollar_figureo iv on date target placed sub into a voluntary liquidation proceeding under country d law pursuant to the proceeding sub distributed to target the benefits of the share subscription agreement in addition sub distributed to target a receivable of dollar_figurek which target immediately cancelled v on date target contributed the share subscription agreement to the capital of target sub vi on date target and the bank lenders entered into a transfer agreement that governed the transfer of target sub stock to acquiring vii on date target and the pension trustee entered into the deed of compromise that governed the settlement of all pension claims against target viii on date target transferred all of the stock of target sub to acquiring in exchange for p shares of acquiring common_stock q shares of acquiring series a preferred_stock q shares of acquiring series b preferred_stock r shares of acquiring series c preferred_stock the assumption of target’s obligation to the pension_plan approximately dollar_figures the assumption of a portion of the amount target owed to the bank lenders under the existing senior facilities the novated debt approximately dollar_figuret and the assumption of facility fees related to the novation approximately dollar_figureu the bank lenders granted target a novation with respect to the novated debt furthermore acquiring agreed to indemnify target and its remaining subsidiaries with respect to certain liabilities up to a predetermined amount and to pay professional plr-130442-06 fees related to the completed transaction in addition acquiring gave a security_interest in certain of its assets ix on date target transferred w shares of acquiring's series a preferred_stock w shares of series b preferred_stock x shares of series c preferred_stock and y shares of common_stock to the bank lenders in satisfaction of the existing senior facilities with a principal_amount of dollar_figurez each of the bank lenders as the most senior class of creditors received the same ratio of stock to nonstock consideration for its claim x on date target transferred w shares of acquiring’s series a preferred_stock w shares of series b preferred_stock aa shares of series c preferred_stock and y shares of common_stock to company a sub in satisfaction of the loan notes with a principal_amount of dollar_figurebb the remaining loan notes of dollar_figurecc were converted to target common_stock collectively steps ix and x are hereinafter referred to as the creditor distribution xi on date target transferred dd shares of acquiring's common_stock to the pension trustee in satisfaction of its obligation under the deed of compromise xii on date target transferred ee shares of acquiring common_stock to certain management employees of target sub xiii on date target transferred its interest in joint_venture to company a sub in exchange for dollar_figuren xiv on date target applied the sale proceeds from step xiii to pay for restructuring fees and other expenses of dollar_figureff and to repay dollar_figuregg due to the bank lenders and to repay dollar_figureh due to target sub target sub applied the proceeds to repay the bank lenders under the fourth tranche of the existing senior facilities xv on date company a sub sold its entire_interest in acquiring for dollar_figurehh to a wholly owned foreign_subsidiary of company a xvi target resolved all known creditors’ claims and liquidated on date as part of this process all of target’s subsidiaries were dissolved and liquidated no distributions were made to target’s shareholders in cancellation of their stock chapter of the united_states bankruptcy code the bankruptcy proceeding on in year acquiring sought a court-supervised bankruptcy reorganization under plr-130442-06 date the bank lenders company a and the pension trustee entered into a restructuring agreement under the supervision of the united_states bankruptcy court on date the bankruptcy court confirmed the bankruptcy plan which resulted in the cancellation of all the existing common and preferred_stock of acquiring and the issuance of new common_stock in satisfaction of dollar_figureii of the novated debt and other indebtedness owed to the bank lenders acquiring’s shareholders sold acquiring stock to a third party for dollar_figureee in a transaction that included the repayment of existing indebtedness and the recapitalization of acquiring with additional equity and new debt following representations on date acquiring emerged from the bankruptcy proceeding and on date in connection with the completed transaction the taxpayers have made the the fair_market_value of acquiring stock received by company a and the bank lenders was approximately equal to the value of target’s securities and debt surrendered or satisfied in the exchange at least percent of the proprietary interest in target was exchanged for acquiring stock and will be preserved within the meaning of sec_1_368-1 of the income_tax regulations neither acquiring nor any person related to acquiring as defined in sec_1_368-1 had any plan or intention to reacquire its stock issued in the completed transaction acquiring acquired more than percent of the fair_market_value of the gross assets held by target and more than percent of the fair_market_value of the operating_assets held by target as of the date of the completed transaction before the completed transaction company a was a shareholder of target after the completed transaction company a was in control of acquiring within the meaning of sec_368 of the internal_revenue_code stock of acquiring was distributed to the holders of the loan notes pursuant to the creditor distribution in a transaction that qualifies under sec_354 a b c d e f g plr-130442-06 h i j k l no holder of the loan notes realized a gain pursuant to the distribution of acquiring stock in satisfaction of such notes pursuant to the creditor distribution at the time of the completed transaction acquiring did not have outstanding warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in acquiring that if exercised or converted would affect company a’s acquisition or retention of control of acquiring as defined in sec_368 the liabilities of target assumed by acquiring as determined under sec_357 were incurred by target in the ordinary course of its business and are associated with the assets transferred the existing senior facilities are not securities for purposes of sec_354 following the completed transaction acquiring will continue a significant historic_business of target or use a significant portion of target’s historic_business_assets in a business within the meaning of sec_1_368-1 m acquiring had no intention to sell or otherwise dispose_of any of the assets of target acquired in the transaction except for dispositions made in the ordinary course of business however a foreign_subsidiary of target sub intended at the time of the completed transaction to sell a dormant manufacturing_facility the facility sold for dollar_figurekk net of selling_expenses target acquiring and company a have paid or will pay their respective expenses if any incurred in connection with the completed transaction there was and is no intercorporate indebtedness existing between acquiring and target that was issued acquired or will be settled at a discount no two parties to the transaction are investment companies as defined in sec_368 and iv the completed transaction was carried out for valid business reasons the fair_market_value of the assets of target transferred to acquiring was equal to or exceeded the sum of the liabilities assumed by acquiring as determined under sec_357 n o p q r plr-130442-06 s t the total adjusted_basis of the assets of target transferred to acquiring were equal to or exceeded the sum of the liabilities assumed by acquiring as determined under sec_357 immediately_after_the_transfer of the stock of target sub target owned more than percent of the fair_market_value of the outstanding_stock of acquiring as a result of owning stock of target sub u with respect to the completed transaction neither target nor acquiring was under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 v w x y z acquiring will file a sec_381 statement pursuant to sec_1_381_b_-1 specifying date as the date of transfer for the completed transaction target has never conducted a trade_or_business_within_the_united_states within the meaning of sec_882 target sub has not been a united_states real_property_holding_company as defined in sec_897 at any time at the time of the completed transaction target did not have any united_states_shareholder within the meaning of sec_1_367_b_-3 acquiring experienced an ownership_change as defined in sec_382 on date aa acquiring did not experience an ownership_change as defined in sec_382 during the period between the completed transaction and the bankruptcy proceeding bb acquiring was under the jurisdiction of the united_states bankruptcy court immediately before the ownership_change occurred in a title_11_or_similar_case as defined in sec_382 and sec_368 cc the transaction that resulted in an ownership_change was pursuant to a bankruptcy plan approved by the united_states bankruptcy court dd the bank lenders received percent of the common_stock of acquiring in the bankruptcy proceeding as a result of being creditors of acquiring immediately before the ownership_change ee the bank lenders that are qualified creditors as defined in sec_1_382-9 of acquiring own after the ownership_change stock of acquiring that plr-130442-06 ff gg meets the requirements of sec_1504 determined by substituting percent for percent for purposes of this representation sec_1 d iv applies to the exchange of target debt obligations for acquiring debt obligations as a result of the completed transaction at the time of the completed transaction target had a net_unrealized_built-in_gain within the meaning of sec_382 immediately after the bankruptcy proceeding there were no outstanding options including interests that are treated as an option under sec_1 e that if exercised or converted would affect the ownership of a controlling_interest by qualified creditors described in the previous representation hh none of the bank lenders that are qualified creditors are described in sec_1_382-9 acquiring does not intend to make an election under sec_382 in respect of the ownership_change resulting from the implementation of the bankruptcy plan based solely upon the information submitted and the representations set forth ii above we rule as follows the acquisition by acquiring of substantially_all the assets of target in exchange for acquiring common and preferred_stock and the subsequent distribution of the stock to target’s creditors in satisfaction of their claims and the assumption of target’s liabilities by acquiring will be treated as a reorganization under sec_368 target and acquiring each will be a_party_to_a_reorganization within the meaning of sec_368 no gain_or_loss will be recognized by target on the transfer of substantially_all of its assets to acquiring in exchange for acquiring stock and the assumption by acquiring of target’s liabilities sec_361 and sec_357 no gain_or_loss will be recognized by target on the distribution of acquiring stock to its creditors sec_361 no gain_or_loss will be recognized by acquiring on the receipt of the target assets in exchange for acquiring stock and the assumption by acquiring of target’s liabilities sec_1032 plr-130442-06 the basis of each of target’s assets in the hands of acquiring will equal the basis of that asset in the hands of target immediately before the transaction sec_362 the holding_period of each target asset in the hands of acquiring will include the period during which the asset was held by target sec_1223 acquiring will generally inherit the items of target described in sec_381 and the regulations thereunder acquiring will be a successor_corporation with respect to target within the meaning of sec_1_382-2 target will be a predecessor_corporation with respect to acquiring within the meaning of sec_1_382-2 for purposes of sec_382 and sec_383 and the regulations thereunder target and acquiring will be treated as a single entity sec_382 no gain_or_loss will be recognized by the holders of the loan notes on the exchange of the principal portion of the notes for acquiring stock sec_354 the provisions of sec_354 will not apply since the acquiring preferred_stock was received in exchange for securities the bank lenders will recognize gain_or_loss on the exchange of the principal portion of the existing senior facilities for acquiring stock sec_1001 the completed transaction resulted in a reverse_acquisition within the meaning of sec_1_1502-75 the completed transaction will not terminate the old target consolidated_group the old target consolidated_group will remain in existence with acquiring as the common parent of the group sec_1_1502-75 the members of the old target consolidated_group prior to the completed transaction will not close their taxable years as a result of the transaction and will remain on the taxable_year previously employed by the old target consolidated_group sec_1_1502-75 acquiring’s basis in stock of target sub immediately after the completed transaction will equal target sub 1’s net asset basis as determined under sec_1_1502-31 plr-130442-06 a bank lender will be a qualified_creditor of acquiring within the meaning of sec_1_382-9 to the extent the third party bank owned qualified indebtedness to acquiring immediately before the ownership_change caused by the bankruptcy proceeding in determining whether acquiring’s debt obligations are qualified indebtedness within the meaning of sec_1_382-9 the bank lenders will be considered to have owned the novated debt for the period they owned the existing senior facilities sec_1_382-9 for purposes of determining whether the ownership_change that occurred with respect to the bankruptcy proceeding met the percent requirement of sec_382 stock owned by a bank lender after the ownership_change will be taken into account to the extent that the bank lender is a qualified_creditor that received acquiring stock in full or partial satisfaction of qualified indebtedness sec_1_382-9 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter no opinion is expressed on the post-bankruptcy sale of acquiring and its effect for purposes of sec_382 furthermore no opinion is expressed as to the federal_income_tax treatment of the transaction under sec_367 sec_1248 or sec_897 the code provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer requesting it sec_6110 of the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling see section dollar_figure of revproc_2006_1 2006_1_irb_1 however when the criteria in section dollar_figure of revproc_2006_1 2006_1_irb_49 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances relevant alternatively taxpayers filing their returns electronically may satisfy this a copy of this letter must be attached to any income_tax return to which it is plr-130442-06 requirement by attaching a statement to their return that provides the date and control number of the 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 representatives sincerely filiz a serbes branch chief branch office of associate chief_counsel corporate