internal_revenue_service index numbers number cc dom corp plr-121425-98 date distributing distributing controlled a controlled b business a business b business c sub a1 sub a2 plr-121425-98 sub a3 sub a4 sub a5 sub a6 sub a7 sub a8 sub a9 sub a10 sub b1 sub b2 sub b3 plr-121425-98 sub b4 sub b5 sub b6 sub b7 sub b8 sub b9 sub b10 sub b11 sub b12 sub b13 sub b14 sub b15 plr-121425-98 sub b16 sub b17 sub b18 sub b19 sub b20 sub b21 sub b22 sub b23 sub b24 sub b25 sub b26 plr-121425-98 sub b27 sub b28 sub b29 sub b30 sub b31 sub b32 sub b33 sub b34 sub b35 sub b36 sub b37 plr-121425-98 sub b38 sub b39 sub b40 sub b41 sub b42 sub b43 sub b44 sub b45 sub b46 sub b47 sub b48 plr-121425-98 sub b49 sub b50 sub b51 sub b52 sub b53 sub b54 sub b55 sub b56 sub b57 sub b58 sub b59 plr-121425-98 sub b60 sub b61 sub b62 sub c1 sub c2 sub c3 sub c4 sub c5 sub c6 sub c7 sub c8 sub c9 plr-121425-98 sub c10 sub c11 sub c12 sub c13 sub c14 sub c15 sub c16 sub c17 sub c18 sub c19 sub c20 plr-121425-98 sub c21 sub c22 sub c23 sub c24 sub c25 sub c26 sub c27 sub c28 sub c29 sub c30 sub c31 plr-121425-98 sub c32 sub c33 north sub c34 sub c35 sub c36 sub c37 sub c38 sub c39 sub c40 sub c41 sub c42 sub c43 plr-121425-98 sub c44 sub c45 sub c46 sub c47 sub c48 sub c49 sub c50 sub c51 sub c52 sub c53 sub c54 plr-121425-98 sub c55 sub c56 sub c57 sub d1 sub d2 sub d3 sub d4 sub d5 sub d6 sub d7 sub d8 plr-121425-98 sub d9 sub d10 sub d11 sub d12 sub d13 sub d14 sub d15 sub d16 sub e1 sub e2 sub e3 sub e4 plr-121425-98 sub e5 sub e6 newco b16 newco b19 newco b21 newco b45 newco b46 newco b47 newco c13 newco c29 newco c33 newco c34 partnership partnership a plr-121425-98 partnership b partnership c partnership d partnership e partnership f partnership g partnership h partnership i partnership j partnership k partnership l partnership m plr-121425-98 partnership n partnership o llc llc a llc b llc c llc d llc e llc f llc g llc h llc i llc j plr-121425-98 llc k llc l llc m llc n llc o llc p llc q llc r llc s trust holdco a1 holdco a2 holdco a3 holdco a4 holdco b1 plr-121425-98 holdco b2 holdco b3 a assets b assets c assets d assets e assets state x state y state z a b c d e f g h plr-121425-98 i j dear this letter responds to your date request for rulings on certain federal_income_tax consequences of a proposed transaction the information in that request and in later correspondence is summarized below summary of facts publicly traded distributing is the common parent of a consolidated_group that conducts business a business b and business c distributing wholly owns distributing together the distributing corporations sub a1 sub a2 sub a3 sub a4 sub a5 sub a6 sub a7 sub a8 and sub a9 distributing also owns the common_stock of sub a10 an unrelated party owns the preferred_stock distributing is engaged directly and through direct and indirect subsidiaries in business a business b and business c distributing wholly owns sub b1 sub b2 sub b3 sub b4 sub b5 sub b6 sub b7 sub b8 sub b9 sub b10 sub b11 sub b12 sub b13 sub b14 sub b15 sub b16 sub b17 sub b18 sub b19 sub b20 sub b21 sub b22 sub b23 sub b24 sub b25 sub b26 sub b27 sub b28 sub b29 sub b30 sub b31 sub b32 sub b33 sub b34 sub b35 sub b36 sub b37 sub b38 sub b39 sub b40 sub b41 sub b42 and sub b43 distributing also owns all the interests in newly formed llc a and llc b sub b13 wholly owns sub b44 sub b19 wholly owns sub b45 sub b46 and sub b47 sub b39 wholly owns sub b48 sub b44 wholly owns sub b49 sub b50 and sub b51 sub b52 is owned by various direct and indirect subsidiaries of sub b44 sub b51 wholly owns sub b53 sub b54 sub b55 sub b56 sub b57 and sub b58 sub b54 wholly owns sub b59 sub b56 wholly owns sub b60 and sub b61 sub b58 wholly owns sub b62 sub a1 is engaged directly and through direct and indirect subsidiaries in business a business b and business c sub a1 wholly owns sub c1 sub c2 sub c3 and sub c4 sub c1 wholly owns sub c5 sub c2 wholly owns sub c6 and sub c7 sub c5 wholly owns sub c8 sub c9 sub c10 sub c11 sub c12 sub c13 sub c14 sub c15 sub c16 sub c17 sub c18 sub c19 sub c20 sub c21 sub c22 sub c23 sub c24 sub c25 and sub c26 sub c6 owns a percent of sub c27 sub plr-121425-98 c7 wholly owns sub c28 sub c29 sub c30 sub c31 sub c32 sub c33 sub c34 sub c35 and sub c36 sub c8 wholly owns sub c37 sub c12 wholly owns sub c38 sub c39 and sub c40 sub c13 wholly owns sub c41 and sub c42 sub c19 wholly owns sub c43 and sub c44 sub c28 wholly owns sub c45 sub c31 wholly owns sub c46 sub c47 sub c48 and sub c49 sub c39 wholly owns sub c50 sub c41 wholly owns sub c51 sub c52 sub c53 sub c54 and sub c55 sub c51 wholly owns sub c56 sub c3 wholly owns sub c57 sub c3 and sub c57 own the limited_partner and general_partner interests respectively in partnership a partnership a provides financing and cash management services to members of the distributing consolidated_group and related entities including loans to and from these entities the loans the inter-affiliate debt sub a2 is engaged through direct and indirect subsidiaries in business b and business c sub a2 wholly owns sub d1 sub d1 wholly owns sub d2 sub d3 and sub d4 sub d2 wholly owns sub d5 sub d6 and sub d7 sub d3 wholly owns sub d8 sub d9 sub d10 sub d11 sub d12 sub d13 and sub d14 sub d4 wholly owns sub d15 sub d16 is owned by sub d2 sub d5 and sub d8 sub e1 is owned by distributing and various direct and indirect subsidiaries of distributing sub a1 and sub a2 sub e1 is the limited_partner in partnership b and partnership c and owns all the interests in llc c the general_partner of partnership b is partnership d all the interests in which are owned by members of the distributing consolidated_group the general_partner of partnership c is sub b59 llc c is the limited_partner in partnership e the general_partner of partnership e is llc d all the interests in which are owned by sub b30 partnership b wholly owns llc e partnership b and llc e are the limited_partner and general_partner respectively in partnership f partnership g and partnership h partnership f partnership g and partnership h each owns business b assets sub e2 is owned by distributing sub c5 sub c7 and sub c10 sub e2 wholly owns sub e3 and sub e4 sub e3 owns all the outstanding interests in llc f sub e5 is owned by distributing sub a1 and sub a2 sub e6 is owned by sub b16 sub c7 sub c13 and sub c31 all of the corporations partnerships and limited_liability companies mentioned above are domestic entities none of the entities mentioned above or in the description of the proposed transaction below that is an eligible_entity under sec_301_7701-3 of the income_tax regulations has elected or will elect under sec_301_7701-3 to be treated as an entity that is not disregarded as an entity separate from its owner unless otherwise specifically indicated these disregarded entities include llc a through f and partnership f through h plr-121425-98 we have received financial information indicating that business a of sub b19 sub b31 and sub b45 business b of sub b17 sub b21 and sub c16 and business c of sub c17 sub c29 sub c33 and sub c34 each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years based on the advice of consultants and other information the management of distributing wishes to have business a and business b implement substantial equity-based compensation plans including employee_stock_ownership_plans or esops tied directly to the performance of each business because the distributing stock is publicly traded however business a and business b cannot form esops while associated with business c see sec_409 and sec_4975 of the internal_revenue_code in addition the management of distributing has determined based on the advice of consultants and other information that the current corporate structure poses operational problems that prevent business a and business b from effectively pursuing the strategies necessary to enhance their performance accordingly distributing proposes to separate business a business b and business c from one another proposed transaction to accomplish the separation of business a business b and business c distributing has proposed and partially undertaken the following transaction the proposed transaction i to facilitate later steps in the proposed transaction a distributing has formed llc a and llc b and b distributing and subs a1 b1 through b12 b14 through b35 b40 b45 through b47 b49 b50 b52 through b60 b62 c1 c2 c5 c9 c11 through c18 c25 c26 c29 c30 c32 c35 c37 through c40 c45 c47 through c50 c56 d1 d3 d4 d8 e1 and e3 through e6 and partnerships f g and h each has contributed or will contribute all or part of its assets to one or more newly formed wholly owned domestic limited_liability companies the contribution llcs certain contribution llcs that are owned by the same entity have contributed or will contribute their assets to newly formed partnerships the new partnerships in exchange for limited_partner and general_partner interests it is intended that llc a llc b each of the contribution llcs and each of the new partnerships be disregarded for federal tax purposes under sec_301_7701-3 ii sub c1 will contribute certain real_estate to a newly formed wholly owned llc g it is intended that llc g be disregarded for federal tax purposes under sec_301_7701-3 iii sub c1 will transfer its membership interests in llc g to distributing plr-121425-98 in partial satisfaction of indebtedness owed by sub c1 to distributing the sub c1 debt iv part of the remaining sub c1 debt will be recapitalized into a long-term security v sub a1 and sub a2 will merge into distributing in transactions intended to qualify under sec_368 the first tier subsidiary mergers vi distributing will contribute its stock in subs a3 through a10 together with certain contracts the contracts to distributing together the first tier contributions vii subs b16 b19 b21 b45 b46 b47 c13 c29 c33 and c34 collectively the reincorporation subs each will reincorporate by merging into a newly formed state x corporation that is wholly owned by the reincorporation sub’s parent_corporation with the newco surviving respectively newcos b16 b19 b21 b45 b46 b47 c13 c29 c33 and c34 in transactions intended to qualify under sec_368 the reincorporations viii subs b1 through b15 b17 b18 b20 b22 through b31 b44 b49 through b51 b53 through b56 b59 b60 c1 c2 c5 through c7 c9 through c12 c14 through c18 c30 through c32 c35 c38 through c42 c50 through c56 d1 through d3 d5 d8 and e2 and newcos b16 b19 b21 b45 through b47 c13 c29 c33 and c34 the merger subs each will merge down into a wholly owned contribution llc or a newly formed wholly owned llc either entity a merger llc with the merger llc surviving this will result in the corporation that wholly owns the merger sub the parent wholly owning the merger llc these mergers the llc mergers will occur in the following order a sub c56 b subs b59 b60 and c50 through c55 c subs b53 through b56 and c38 through c42 d subs b49 through b51 c9 through c12 c14 through c18 c30 through c32 c35 d5 and d8 and newcos c13 c29 c33 and c34 e subs b44 c5 through c7 d2 and d3 and newcos b45 through b47 f subs b1 through b15 b17 b18 b20 b22 through b31 c1 c2 and d1 and newcos b16 b19 and b21 and g sub e2 it is intended that each of the merger llcs be disregarded for federal tax purposes under sec_301_7701-3 plr-121425-98 ix distributing will contribute the contracts to the merger llc that succeeds to sub c1 in the sub c1 llc merger merger llc c1 x merger llc c1 will contribute b percent and c percent undivided interests in certain contracts including the contracts to newly formed trust and newly formed llc h respectively in exchange for the trust beneficial interests and the llc h membership interests trust and llc h each will then contribute these interests to newly formed partnership i in exchange for a limited_partner interest and a general_partner interest respectively it is intended that trust and llc h be disregarded for federal tax purposes under sec_301_7701-3 it is intended that partnership i be disregarded for federal tax purposes under sec_301_7701-3 up until the time of the earlier of step xxxi or step xxxix below xi merger llc c1 will contribute b percent and c percent undivided interests in a assets to trust and llc h respectively trust and llc h each will then contribute its undivided interests in these assets to newly formed partnership j in exchange for a limited_partner interest and a general_partner interest respectively it is intended that partnership j be disregarded for federal_income_tax purposes under sec_301_7701-3 xii trust will distribute two limited_partner interests in partnership i the partnership i interests to merger llc c1 xiii merger llc c1 will distribute to distributing certain assets including its interests in the merger llc that succeeds to sub c5 in the sub c5 llc merger and the partnership i interests xiv subs b32 b57 b58 b62 c25 c37 c45 c47 through c49 d4 e5 and e6 each will sell its business a and business b assets to distributing for fair_market_value consideration the assets that sub d4 sells to distributing will include the stock of sub d15 xv sub c26 will sell its business b assets to sub b43 for fair_market_value consideration xvi partnerships f g and h will convert under state law into llc i llc j and llc k respectively the conversion llcs it is intended that the conversion llcs be disregarded for federal tax purposes under sec_301_7701-3 xvii llc e will distribute its interests in llcs i j and k to partnership b plr-121425-98 xviii partnership b will distribute its interests in llcs i j and k including the interests it received from llc e in step xvii to sub e1 xix subs b52 and e1 will contribute their business a and business b assets including all of their interests in certain contribution llcs and all of sub e1’s interests in partnership c and llcs c i j and k to distributing in exchange for newly issued distributing voting preferred_stock the distributing contribution the distributing contribution taken alone will not reduce the amount a third party would pay for the stock of sub b52 sub e1 distributing or any related corporation xx distributing will form controlled a and controlled b as wholly owned domestic subsidiaries the controlled corporations xxi distributing will form a wholly owned llc holdco a4 that will elect under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation effective at the time of the transactions described below in step xxii xxii under plans of reorganization subs b33 b34 b35 e3 and e4 the reorg subs each will a transfer all of its assets to holdco a4 in exchange for the assumption by holdco a4 of the reorg sub’s liabilities other than any inter-affiliate debt owed by the reorg sub that is assumed by distributing and b merge into an llc that is wholly owned by the reorg sub a reorg llc with the reorg llc surviving a and b together a reorg it is intended that the reorg llcs be disregarded for federal tax purposes under sec_301_7701-3 xxiii contribution llcs and merger llcs that own a combination of assets directly or through lower-tier contribution llcs and merger llcs that will be held by different entities following the proposed transaction each will distribute certain of these assets to its sole owner the distributed assets may include interests in lower-tier contribution llcs and merger llcs xxiv sub e6 and certain contribution llcs that are lessors and lessees and sublessors and sublessees respectively on leases and subleases relating to certain business a and business b realty will cancel their respective lessor lessee sublessor and sublessee positions xxv distributing will contribute b percent and c percent undivided interests in b assets including its interests in certain contribution llcs that own b assets to newly formed wholly owned llc l and llc m respectively llc l and llc m each will then contribute its undivided interests in these assets to newly formed partnership k in exchange for a limited_partner interest and a general_partner interest respectively it is intended that llc l and llc m each be disregarded for federal tax purposes under sec_301_7701-3 it is intended that partnership k be disregarded for federal tax purposes under sec_301_7701-3 up until the time of step xxxv below plr-121425-98 xxvi distributing will contribute cash or cash equivalents to newly formed wholly owned llc n and llc o llc n and llc o each will then contribute these assets to newly formed partnership l in exchange for a limited_partner interest and a general_partner interest respectively it is intended that llc n and llc o each be disregarded for federal tax purposes under sec_301_7701-3 it is intended that partnership l be disregarded for federal tax purposes under sec_301_7701-3 up until the time of step xxxv below xxvii distributing will contribute b percent and c percent undivided interests in c assets including its interests in certain contribution llcs that own c assets plus cash or cash equivalents to newly formed wholly owned llc p and llc q respectively llc p and llc q each will then contribute its undivided interests in these assets to newly formed partnership m in exchange for a limited_partner interest and a general_partner interest respectively it is intended that llc p and llc q each be disregarded for federal tax purposes under sec_301_7701-3 it is intended that partnership m be disregarded for federal tax purposes under sec_301_7701-3 up until the time of step xli below xxviii llc a will merge into controlled a and llc b will merge into controlled b xxix distributing will borrow between d and e dollars from unrelated lenders the controlled a debt use all or part of the proceeds to repay the non-recapitalized part of the sub c1 debt and use the remainder if any to repay inter-affiliate debt attributable to business a xxx distributing will assume certain inter-affiliate debt owed to partnership a by entities including entities that are disregarded for federal tax purposes that will be contributed by distributing to controlled a in step xxxi below xxxi distributing will contribute to controlled a the assets that relate to business a including a its ownership interests in certain contribution llcs and merger llcs b its ownership interests in the reorg llcs c its interests in certain partnerships d its ownership interests in llcs l m n and o e a limited_partner interest in partnership i and f its stock in subs b36 b38 b41 c4 and c36 and holdco a4 f collectively the controlled a contributed subsidiaries in exchange for controlled a voting_stock and the assumption by controlled a of liabilities related to business a including the controlled a debt the controlled a contribution xxxii controlled a will contribute to newly formed wholly owned holdco a1 all of the assets received from distributing in step xxxi in exchange for holdco a1 plr-121425-98 voting_stock and the assumption by holdco a1 of liabilities related to business a including the controlled a debt the holdco a1 contribution xxxiii holdco a1 will contribute to newly formed wholly owned llc r an undivided c percent interest in certain business a assets located in state y including contribution llcs and merger llcs that directly or indirectly own such assets the state y assets in exchange for all of the membership interests in llc r holdco a1 and llc r each will then contribute its interests in the state y assets to newly formed partnership n in exchange for a limited_partner interest and a general_partner interest respectively it is intended that llc r be disregarded for federal tax purposes under sec_301_7701-3 it is intended that partnership n be disregarded for federal tax purposes under sec_301_7701-3 up until the time of step xxxv below xxxiv holdco a1 will contribute to newly formed wholly owned llc s an undivided c percent interest in certain business a assets located in state z including contribution llcs and merger llcs that directly or indirectly own such assets the state z assets in exchange for all of the membership interests in llc s holdco a1 and llc s each will then contribute its interests in the state z assets to newly formed partnership o in exchange for a limited_partner interest and a general_partner interest respectively it is intended that llc s be disregarded for federal tax purposes under sec_301_7701-3 it is intended that partnership o be disregarded for federal tax purposes under sec_301_7701-3 up until the time of step xxxv below xxxv holdco a1 will contribute to a newly formed wholly owned llc holdco a2 part of the assets received from controlled a in step xxxii including its ownership interests held directly or through contribution llcs or merger llcs in entities that a are characterized as partnerships or corporations for federal_income_tax purposes and b were characterized as such before the llc mergers the preexisting entities and its ownership interests in llcs m o r and s in exchange for all of the membership interests stock in holdco a2 and the assumption by holdco a2 of liabilities related to business a possibly including part of the controlled a debt the holdco a2 contribution holdco a1 will retain in the form of interests in contribution llcs or merger llcs or both assets formerly owned by subs b19 b31 and b45 and certain other assets holdco a2 will elect under sec_301 b to be treated as an association_taxable_as_a_corporation effective at the time of the holdco a2 contribution xxxvi holdco a2 will contribute to newly formed wholly owned holdco a3 part of the assets received from holdco a1 in step xxxv including its ownership interests in preexisting entities in exchange for holdco a3 voting_stock and the assumption by holdco a3 of liabilities related to business a possibly including part of the controlled a debt the holdco a3 contribution plr-121425-98 xxxvii distributing will borrow between f and g dollars from unrelated lenders the controlled b debt use all or part of the proceeds to repay the non-recapitalized part of the sub c1 debt and use the remainder if any to repay inter-affiliate debt attributable to business b xxxviii distributing will assume certain inter-affiliate debt owed to partnership a by entities including entities disregarded for federal tax purposes that will be contributed by distributing to controlled b in step xxxix below xxxix distributing will contribute to controlled b the assets that relate to business b including a its ownership interests in certain contribution llcs and merger llcs b its interests in certain partnerships c all of its ownership interests in llcs c i j k p and q d a limited_partner interest in partnership i and e all of its stock in subs b37 b39 b40 b42 b43 b61 c19 through c24 c27 c46 d6 d7 and d9 through d16 e collectively the controlled b contributed subsidiaries and together with the controlled a contributed subsidiaries the contributed subsidiaries in exchange for controlled b voting_stock and the assumption by controlled b of liabilities related to business b including the controlled b debt the controlled b contribution xl controlled b will contribute to newly formed wholly owned holdco b1 all of the assets received from distributing in step xxxix in exchange for holdco b1 voting_stock and the assumption by holdco b1 of liabilities related to business b including the controlled b debt the holdco b1 contribution xli holdco b1 will contribute to a newly formed wholly owned llc holdco b2 part of the assets received from controlled b in step xl including its ownership interests in preexisting entities and all of its ownership interests in llc q in exchange for all of the membership interests stock in holdco b2 and the assumption by holdco b2 of liabilities related to business b possibly including part of the controlled b debt the holdco b2 contribution holdco b1 will retain in the form of interests in contribution llcs or merger llcs assets formerly owned by subs b17 b21 and c16 and certain other assets holdco b2 will elect under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation effective at the time of the holdco b2 contribution xlii holdco b2 will contribute to newly formed wholly owned holdco b3 part of the assets received from holdco b1 in step xli including its ownership interests in preexisting entities in exchange for holdco b3 voting_stock and the assumption by holdco b3 of liabilities related to business b possibly including part of the controlled b debt the holdco b3 contribution plr-121425-98 xliii subs b36 b37 b61 c4 c19 c36 c43 c44 and c46 and certain partnerships will be renamed to reflect that they are no longer associated with distributing xliv any remaining inter-affiliate debt between partnership a and entities that will be affiliates of controlled a or controlled b following the proposed transaction will be eliminated through distributions capital contributions payments assumptions or acquisitions of such debt as appropriate so that there will not be any such debt following the proposed transaction xlv as part of the proposed transaction certain entities that are a owned or treated as owned for federal_income_tax purposes by the same entity and b disregarded as entities separate from such owner for federal tax purposes will be merged together the disregarded_entity mergers disregarded_entity mergers will occur in the following circumstances a the merger of a parent merger llc and its subsidiary merger llc or contribution llc b the merger of certain contribution llcs and or merger llcs that own synergistic assets related to particular business a or business b operations and c the merger of certain contribution llcs that directly or indirectly own interests in disregarded partnerships that are considered synergistic xlvi distributing will distribute the stock of controlled a and controlled b to distributing the first distribution xlvii distributing will distribute the stock of controlled a and controlled b pro_rata to its shareholders the second distribution distributing shareholders will receive cash in lieu of fractional controlled a and controlled b shares each share of controlled a and controlled b stock will have attached to it a purchase right not exercisable or transferable separately from the controlled a or controlled b stock as the case may be unless and until certain triggering events generally involving changes in corporate control occur the controlled a rights and controlled b rights respectively and together the controlled rights xlviii distributing controlled a and controlled b will enter into agreements under which the parties will mutually agree to indemnify each other for certain losses including losses arising out of or resulting from the assets contributed to controlled a and controlled b certain events occurring before the second distribution untrue statements or representations breaches of contract violations of law and other similar events the indemnity agreements the indemnity agreements will include a tax_sharing_agreement under which the parties will mutually agree to indemnify each other for tax and related liabilities relating to certain tax periods ending before on and after the date of the second distribution xlix distributing controlled a and controlled b and or their respective affiliates will enter into agreements including subleases of certain office space for each plr-121425-98 of the controlled corporations and the provision by distributing or its affiliates of certain transitional services to the controlled corporations and or their affiliates the transitional agreements in addition the parties intend to sublicense certain intellectual_property to one another on a royalty-free basis some of the sublicensed property will have been transferred in the controlled a and controlled b contributions and in subsequent contributions l in connection with the second distribution controlled a and controlled b each will establish solely for the benefit of its employees an esop intended to satisfy the requirements of sec_401 and sec_4975 the controlled a esop and the controlled b esop respectively no later than one year after the second distribution controlled a will sell newly issued voting common_stock to the controlled a esop which as of the time of the sale will cause the controlled a esop to own h percent of the then outstanding controlled a common_stock the controlled a esop will finance the purchase_price of the controlled a stock by issuing a promissory note to controlled a the controlled a esop note or by borrowing from a third party lender the loan to be guaranteed by controlled a the controlled a esop debt will be amortized over a period of not more than i years if controlled a receives a controlled a esop note it will contribute the controlled a esop note to holdco a1 which then may contribute an undivided c percent interest in the controlled a esop note to holdco a2 holdco a1 and holdco a2 would then contribute their respective interests in the controlled a esop note to llc n and llc o respectively each of which then would contribute these interests to partnership l no later than one year after the second distribution controlled b will sell newly issued voting common_stock to the controlled b esop which as of the time of the sale will cause the controlled b esop to own j percent of the then outstanding controlled b common_stock the controlled b esop will finance the purchase_price of the controlled b stock by issuing a promissory note to controlled b the controlled b esop note or by borrowing from a third party lender the loan to be guaranteed by controlled b the controlled b esop debt will be amortized over a period of not more than i years if controlled b receives a controlled b esop note it will contribute the controlled b esop note to holdco b1 which then may contribute an undivided c percent interest in the controlled b esop note to holdco b2 holdco b1 and holdco b2 would then contribute their respective interests in the controlled b esop note to llc p and llc q respectively each of which then would contribute these interests to partnership m li adjustments will be made to the outstanding vested and unvested nonqualified employee stock_options to acquire distributing stock the vested distributing options and the unvested distributing options respectively as follows a except in the case of options to acquire a small number of shares the plr-121425-98 exercise price of vested distributing options will be adjusted to reflect the reduced value of distributing as a result of the second distribution and holders of vested distributing options will receive additional vested options to acquire stock of controlled a and controlled b the vested controlled options and together with the vested distributing options the vested options b in the case of those holding vested distributing options to acquire a small number of distributing shares a cash-out payment may be made or the options may be adjusted in a manner that preserves the value of such options immediately before the second distribution c unvested distributing options held by holders who become employees of controlled a or controlled b or their respective subsidiaries will be terminated and the controlled corporations may in their discretion grant unvested options to acquire stock of controlled a or controlled b as the case may be the unvested controlled options to such holders and d unvested distributing options held by holders who continue to be employed by distributing or its subsidiaries will be adjusted in a manner that preserves the value of such options immediately before the second distribution a b other than any cash-out payment described therein c and d collectively the option adjustments unvested options to acquire stock of controlled a and controlled b will also be issued to certain employees of distributing and its subsidiaries lii one or both of the controlled corporations may institute odd-lot programs under which controlled_corporation shareholders who own less than shares of controlled a stock or controlled b stock could elect to sell the shares to the issuing controlled_corporation through an exchange agent the odd-lot programs liii qualified_plans of distributing controlled a and or controlled b that invest in employer_securities may engage in sales and or exchanges of non- employer_securities liv certain business a assets that will not be relied upon to satisfy the active_trade_or_business_requirement of sec_355 d assets may be sold or otherwise_disposed_of before or after the controlled a contribution if an entity that owns solely d assets sells all of its assets before the controlled a contribution the entity will not participate in the proposed transaction lv certain business b assets that will not be relied upon to satisfy the active_trade_or_business_requirement of sec_355 e assets may be sold or otherwise_disposed_of before or after the controlled b contribution if an entity that owns solely e assets sells all of its assets before the controlled b contribution the entity will not participate in the proposed transaction lvi following the second distribution distributing may engage in a reverse-split of its common_stock plr-121425-98 lvii following the second distribution distributing may change its name following the second distribution controlled a and its subsidiaries will conduct business a controlled b and its subsidiaries will conduct business b and distributing and its subsidiaries will conduct business c representations first tier subsidiary mergers the taxpayer makes the following representation regarding the first tier subsidiary mergers a to the best of the taxpayer’s knowledge and belief provided the internal_revenue_service rules as the taxpayer requests each first tier subsidiary merger will qualify as a reorganization under sec_354 and sec_368 the reincorporations the taxpayer makes the following representation regarding the reincorporations b to the best of the taxpayer's knowledge and belief provided the internal_revenue_service rules as the taxpayer requests each reincorporation will qualify as a reorganization under sec_368 the llc mergers the taxpayer makes the following representations regarding the llc mergers c at the time a merger sub adopts a plan of merger liquidation and at all times until its merger liquidation is completed the merger sub’s parent will be the owner of at least percent of the single outstanding class of the merger sub's stock d except for sub e2 which consummated redemptions that are unrelated to the proposed transaction no shares of any merger sub's stock will have been redeemed during the three years preceding adoption of the merger sub's plan of merger liquidation plr-121425-98 e all distributions from each merger sub to its parent under the merger sub’s plan of merger liquidation will be made within a single taxable_year of the merger sub f upon the llc merger of each merger sub the merger sub will cease to be a going concern and its activities will be limited to winding up its affairs paying its debts and distributing its remaining assets to its parent g no merger sub will retain any assets following its llc merger h no merger sub will have acquired assets in any nontaxable_transaction at any time except for i acquisitions occurring more than three years before the date of adoption of its plan of merger liquidation ii acquisitions pursuant to the proposed transaction and iii certain acquisitions occurring within the three years before adoption of the merger sub’s plan of merger liquidation in transactions unrelated to the proposed transaction i no assets of any merger sub have been or will be disposed of by the merger sub or its parent except for i dispositions in the ordinary course of business ii dispositions occurring more than three years before adoption of the merger sub’s plan of merger liquidation iii dispositions pursuant to the proposed transaction and iv certain dispositions occurring within the three years before adoption of the merger sub’s plan of merger liquidation in transactions unrelated to the proposed transaction j no merger sub’s llc merger will be preceded or followed by the reincorporation in or transfer or sale to a recipient corporation recipient of any of the businesses or assets of the merger sub if persons holding directly or indirectly more than percent in value of the merger sub's stock also hold directly or indirectly more than percent in value of the stock in recipient for purposes of this representation ownership will be determined immediately after the second distribution and by application of the constructive_ownership rules of sec_318 as modified by sec_304 k before adoption of each merger sub's plan of merger liquidation no assets of the merger sub will have been distributed in_kind transferred or sold to the merger sub's parent except for i transactions occurring in the normal course of business ii transactions occurring more than three years before adoption of the merger sub’s plan of merger liquidation and iii certain distributions occurring within the three years before adoption of the merger sub's plan of merger liquidation in transactions unrelated to the proposed transaction l the fair_market_value of the assets of each merger sub will exceed its liabilities both at the date of the adoption of its plan of merger liquidation and immediately before the time of its llc merger plr-121425-98 m there is no intercorporate debt existing between any merger sub and its parent and none has been canceled forgiven or discounted except for transactions that occurred more than three years before the date of adoption of the merger sub’s plan of merger liquidation n no parent is an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code o all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the proposed llc mergers have been fully disclosed the contributions the taxpayer makes the following representations regarding the distributing contribution the controlled a contribution the controlled b contribution the holdco a1 contribution the holdco b1 contribution the holdco a2 contribution the holdco b2 contribution the holdco a3 contribution and the holdco b3 contribution collectively the contributions and each one a contribution hereinafter the transferee in a contribution is the transferee and the transferor s in a contribution are the transferor s p no stock_or_securities will be issued for services rendered to or for the benefit of any transferee in connection with the proposed transaction and no stock_or_securities will be issued for indebtedness of any transferee that is not evidenced by a security or for interest on indebtedness of any transferee that accrued on or after the beginning of the holding_period of the transferor s for the debt q none of the stock to be transferred in any contribution is sec_306 stock sec_306 r no contribution is the result of the solicitation by a promoter broker or investment house s no transferor will retain any rights in the property transferred to a transferee except as described above in step xlix t the value of the stock received in any contribution in exchange for accounts_receivable will equal the net value of the accounts transferred ie the face_amount of the accounts_receivable previously included in income less the amount of the reserve_for_bad_debt u the adjusted_basis and the fair_market_value of the assets transferred by any transferor to its transferee will in each instance equal or exceed the sum of plr-121425-98 the liabilities assumed by the transferee plus any liabilities to which the transferred assets are subject v any liabilities of a transferor that will be assumed by its transferee were incurred in the ordinary course of business and are associated with the assets to be transferred w there is no indebtedness between any transferee and its transferor s and there will be no indebtedness created in favor of the transferor s as a result of the contribution x the transfers and exchanges in each contribution will occur under a plan agreed upon before the transaction in which the rights of the parties are defined y all exchanges in each contribution will occur on approximately the same date z there is no plan or intention on the part of any transferee to redeem or otherwise reacquire any stock or indebtedness issued in any contribution other than for the controlled corporations i repurchases of common_stock meeting the requirements of sec_4 b of revproc_96_30 1996-1c b and ii purchases of stock under the odd-lot programs aa taking into account any issuance of additional shares of transferee stock any issuances of stock for services the exercise of any transferee stock_rights warrants or subscriptions a public offering of transferee stock and the sale exchange transfer by gift or other_disposition of any transferee stock received in the exchange the transferor s will be in control of the transferee under sec_368 immediately following each contribution bb the transferor s in each contribution will receive stock approximately equal to the fair_market_value of the property transferred by it to the transferee cc each transferee will remain in existence and will retain and use the property transferred to it in a trade_or_business except for dispositions in the proposed transaction and dispositions in the normal course of business operations dd there is no plan or intention by any transferee to dispose_of the transferred property other than i in the normal course of business operations and ii in the proposed transaction ee each of the parties to the contributions will pay its own expenses if any incurred in connection with the contributions plr-121425-98 ff no transferee will be an investment_company under sec_351 and sec_1 c ii gg no transferor is under the jurisdiction of a court in a title_11_or_similar_case under sec_368 and no stock_or_securities received in any contribution will be used to satisfy the indebtedness of such debtor sec_269a hh no transferee will be a personal_service_corporation under the first tier contributions the taxpayer makes the following representation regarding the first tier contributions ii to the best of the taxpayer’s knowledge and belief provided the internal_revenue_service rules as the taxpayer requests the first tier contributions will qualify as exchanges described in sec_351 and or with respect to subs a3 through a10 as reorganizations under sec_368 the reorgs the taxpayer makes the following representations regarding the reorgs jj the fair_market_value of the holdco a4 stock deemed received by distributing in each reorg will approximately equal the fair_market_value of the reorg sub stock surrendered in the exchange kk except as described in the proposed transaction there is no plan or intention by distributing to sell exchange or otherwise dispose_of a number of shares of holdco a4 stock received in a reorg that would reduce its ownership of holdco a4 stock to a number of shares having a value as of the date of the reorg of less than percent of the value of all of the formerly outstanding_stock of the reorg sub as of the same date for purposes of this representation shares of a reorg sub's stock exchanged for cash or other_property surrendered by dissenters or exchanged for cash in lieu of fractional shares of holdco a4 stock will be treated as outstanding_stock of the reorg sub on the date of the reorg moreover shares of any reorg sub stock and shares of holdco a4 stock held by distributing and otherwise sold redeemed or disposed of before or after the reorg will be considered in making this representation ll holdco a4 will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by each reorg sub immediately before the reorg for purposes of this representation amounts paid_by a reorg sub to dissenters amounts paid_by a reorg sub to shareholders who receive cash or other_property amounts used by a reorg sub to pay plr-121425-98 its reorganization expenses and all redemptions and distributions except for regular normal dividends made by a reorg sub immediately before the transfer will be included as assets of such reorg sub held immediately before the reorg mm after the reorg distributing will be in control of holdco a4 under sec_368 nn holdco a4 has no plan or intention to reacquire any of its stock deemed issued in any reorg oo holdco a4 has no plan or intention to sell or otherwise dispose_of any of the assets of any reorg sub acquired in the transaction except for dispositions made in the ordinary course of business and possibly the disposition of its interests in or the assets of llc f pp the liabilities of each reorg sub assumed by holdco a4 plus the liabilities if any to which the transferred assets are subject were incurred by the reorg sub in the ordinary course of its business and are associated with the assets transferred qq following the reorgs holdco a4 will continue the historic_business of each reorg sub or use a significant portion of the reorg sub's historic_business_assets in a business rr at the time of the reorgs holdco a4 will not have outstanding any warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in holdco a4 that if exercised or converted would affect distributing 1's acquisition or retention of control of holdco a4 under sec_368 ss holdco a4 each reorg sub and distributing each will pay its expenses if any incurred in connection with the reorgs tt there is no intercorporate indebtedness existing between holdco a4 and any reorg sub that was issued acquired or will be settled at a discount uu no two parties to any reorg are investment companies under sec_368 and iv vv the fair_market_value of the assets of each reorg sub transferred to holdco a4 will equal or exceed the sum of the liabilities assumed by holdco a4 from the reorg sub plus the amount of liabilities if any to which the transferred assets are subject plr-121425-98 ww the total adjusted_basis of the assets of each reorg sub transferred to holdco a4 will equal or exceed the sum of the liabilities to be assumed by holdco a4 from the reorg sub plus the amount of liabilities if any to which the transferred assets are subject xx no reorg sub is under the jurisdiction of a court in a title_11_or_similar_case under sec_368 the distributions the taxpayer makes the following representations regarding the first distribution and the second distribution together the distributions yy provided the taxpayer receives the rulings and subissue rulings it has requested no part of the consideration distributed by distributing in the first distribution will be received by distributing as a creditor employee or in any capacity other than that of a shareholder of the corporation zz no part of the consideration distributed by distributing in the second distribution will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation aaa the five years of financial information submitted on behalf of subs b17 b19 b21 b31 b45 c16 c17 c29 c33 and c34 represents in each case the corporation's present operations and with regard to each corporation there have been no substantial operational changes since the date of the last financial statements submitted bbb immediately after the first distribution at least percent of the fair_market_value of the gross assets of controlled a and at least percent of the fair_market_value of the gross assets of controlled b will consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 ccc immediately after the second distribution at least percent of the fair_market_value of the gross assets of distributing at least percent of the fair_market_value of the gross assets of controlled a and at least percent of the fair_market_value of the gross assets of controlled b will consist of the stock and securities of controlled corporations that are engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 ddd following the first distribution distributing controlled a indirectly and controlled b indirectly each will continue the active_conduct of its business independently and with its separate employees except that distributing and plr-121425-98 its affiliates will provide certain transitional services for the controlled corporations following the second distribution eee following the second distribution distributing indirectly controlled a indirectly and controlled b indirectly each will continue the active_conduct of its business independently and with its separate employees except that distributing and its affiliates will provide certain transitional services for the controlled corporations following the second distribution fff the distributions are carried out for the following corporate business purposes to enable each controlled_corporation to i attract motivate and retain key management and other employees by adopting separate esops and providing compensation packages that include other equity incentives tied directly and exclusively to the stock of the controlled_corporation and ii solve operational problems inherent in the current corporate structure and enhance the controlled corporation’s performance and earnings by permitting its management to focus attention on smaller strategically aligned markets and adopt strategies and pursue objectives that are appropriate to the unique characteristics and needs of local communities within those markets the distributions are motivated in whole or substantial part by one or more of these corporate business purposes ggg except as described in the proposed transaction there is no plan or intention by distributing to sell exchange transfer by gift or otherwise dispose_of any of its stock in or securities of distributing or either controlled_corporation hhh there is no plan or intention by any shareholder who owns five percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or either of the controlled corporations after the transaction other than i in ordinary market trading ii in connection with repurchases of common_stock meeting the requirements of sec_4 b of revproc_96_30 iii sales of controlled_corporation stock under the odd-lot programs and iv sales or exchanges of non-employer securities by qualified_plans of distributing controlled a and or controlled b iii there is no plan or intention by any distributing_corporation or controlled_corporation directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 and purchases of stock under the odd-lot programs jjj there is no plan or intention to liquidate any distributing_corporation or controlled_corporation to merge any such corporation with any other corporation or plr-121425-98 to sell or otherwise dispose_of the assets of any such corporation after the transaction except in the ordinary course of business and except for the sale_or_other_disposition of assets that will not be relied upon to satisfy the active_trade_or_business_requirement kkk i the total adjusted_basis and the fair_market_value of the assets transferred to controlled a and controlled b by distributing in each case equals or exceeds the sum of the liabilities assumed by the controlled_corporation plus any liabilities to which the assets transferred to the controlled_corporation are subject and ii the liabilities assumed in the transaction and the liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred lll apart from indebtedness that may arise as a result of the transitional agreements or the indemnity agreements no intercorporate debt will exist between any distributing_corporation and any controlled_corporation at the time of or after the distributions mmm immediately before each distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further any excess_loss_account a distributing_corporation may have in the stock of a controlled_corporation will be included in income immediately before the distributions to the extent required by regulations see sec_1_1502-19 nnn payments made in any continuing transactions between distributing and its affiliates on the one hand and either controlled_corporation and its affiliates on the other hand will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length except that i distributing and its affiliates will provide certain corporate support and transitional services to the controlled corporations at fair_market_value or on a fully allocated cost_basis which distributing believes approximates fair_market_value because the controlled corporations will not be in existence at the time the agreements are drafted the terms will not be the result of actual arm's length negotiations ii distributing or its affiliates will sublease certain office space to each of the controlled corporations on a pass-through basis and iii the parties intend to sublicense certain intellectual_property to one another on a royalty- free basis ooo no two parties to any distribution will be investment companies under sec_368 and iv ppp neither distribution is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly plr-121425-98 stock possessing percent or more of the total combined voting power of all classes of stock of the distributing_corporation or either controlled_corporation entitled to vote or stock possessing percent or more of the total value of all classes of stock of the distributing_corporation or either controlled_corporation within the meaning of sec_355 qqq the payment of cash to distributing shareholders in lieu of fractional shares of stock in either controlled_corporation is solely for the purpose of saving the expense and inconvenience of issuing and transferring fractional shares and is not separately bargained for consideration the method used for handling fractional shares is designed to limit the amount of cash received by any one shareholder to less than the value of one full share of common_stock of each controlled_corporation rrr the controlled a rights cannot be separately traded and are not divisible from the controlled a stock before certain triggering events occur before the occurrence of these events these rights may be redeemed by controlled a at the time of the distributions the likelihood that the controlled a rights would be exercised will be both remote and uncertain sss the controlled b rights cannot be separately traded and are not divisible from the controlled b stock before certain triggering events occur before the occurrence of these events these rights may be redeemed by controlled b at the time of the distributions the likelihood that the controlled b rights would be exercised will be both remote and uncertain rulings the first tier subsidiary mergers based solely on the information submitted and the representations set forth above we rule as follows on each first tier subsidiary merger neither i the absence of an actual stock issuance by distributing in connection with a first tier subsidiary merger nor ii the other steps in the proposed transaction will affect the qualification or treatment of a first tier subsidiary merger as a reorganization under sec_354 and sec_368 the reincorporations based solely on the information submitted and the representations set forth above we rule as follows on each reincorporation plr-121425-98 none of the other steps in the proposed transaction will affect the qualification or treatment of any reincorporation as a reorganization under sec_368 the llc mergers based solely on the information submitted and the representations set forth above we rule as follows on each of the llc mergers each llc merger will qualify for federal_income_tax purposes as a complete_liquidation of the merger sub into its parent under sec_332 sec_301_7701-2 -2 c i -3 b ii sec_332 sec_1_332-2 no gain_or_loss will be recognized by a parent on receiving the assets and liabilities of its merger sub in an llc merger sec_332 no gain_or_loss will be recognized by a merger sub on the distribution of its assets to or the assumption of its liabilities by its parent sec_336 sec_337 sec_337 the basis a parent will have in each asset received from its merger sub as a result of an llc merger will equal the basis of that asset in the hands of the merger sub immediately before the llc merger sec_334 the holding_period a parent will have in each asset received from its merger sub as a result of an llc merger will include the period during which that asset was held by the merger sub sec_1223 each parent will succeed to and take into account the items of its merger sub described in sec_381 subject_to the conditions and limitations specified in sec_381 and c and the regulations thereunder sec_381 sec_1_381_a_-1 each parent will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of its merger sub as of the date of the llc merger sec_381 sec_1_381_c_2_-1 any deficit in the earnings_and_profits of a merger sub or its parent will be used only to offset earnings_and_profits accumulated after the date of the llc merger sec_381 the reorgs based solely on the information submitted and the representations set forth above we rule as follows on each of the reorgs plr-121425-98 for federal_income_tax purposes each reorg will be treated as i a transfer by the reorg sub of substantially_all of its assets to holdco a4 in exchange for stock of holdco a4 followed by ii the reorg sub’s distribution of the holdco a4 stock to distributing in exchange for distributing 1's stock in the reorg sub in complete_liquidation of the reorg sub for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of each reorg sub immediately before its reorg each reorg will constitute a reorganization under sec_368 holdco a4 and each reorg sub each will be a party to the reorganization under sec_368 no gain_or_loss will be recognized by a reorg sub on its reorg and any assumption of inter-affiliate debt by distributing sec_361 and c and a revrul_70_271 c b no gain_or_loss will be recognized by holdco a4 on any reorg sec_1032 the basis of each asset received by holdco a4 in a reorg will equal the basis of that asset in the hands of the transferring reorg sub immediately before the reorg sec_362 the holding_period of each asset received by holdco a4 in a reorg will include the holding_period of that asset in the hands of the transferring reorg sub immediately before the reorg sec_1223 no gain_or_loss will be recognized by distributing on the constructive exchange of its stock in a reorg sub solely for holdco a4 stock and the assumption by distributing of any inter-affiliate debt of the reorg sub sec_354 the basis of distributing 1's holdco a4 stock will be i increased by distributing 1's basis in the stock of each reorg sub plus the amount of any inter-affiliate debt of the reorg sub assumed by distributing and ii decreased by the amount of any excess_loss_account in the reorg sub’s stock immediately before its reorg sec_358 and sec_1016 rev_rul the taxable_year of each reorg sub will end on the effective date of the reorg sec_381 holdco a4 will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of each reorg sub as of the date of the reorg and any deficit in earnings_and_profits of either the reorg sub or holdco a4 will be used only to offset earning and profits accumulated after the date of the reorg plr-121425-98 sec_381 and sec_1_381_c_2_-1 holdco a4 will succeed to and take into account the items of the reorg sub described in sec_381 subject_to the conditions and limitations of sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 the contributions based solely on the information submitted and the representations set forth above we rule as follows on each of the contributions with the possible exception of gain_or_loss on transfers of less than all the rights in certain intangibles mentioned in step xlix no gain_or_loss will be recognized by any transferor on any contribution sec_351 and sec_357 revrul_77_449 1977_2_cb_110 revrul_83_156 c b the basis of each asset received by a transferee in a contribution will equal the basis of that asset in the hands of the transferor immediately before the contribution sec_362 the holding_period of each asset received by a transferee in a contribution will include the holding_period of that asset in the hands of the transferor sec_1223 no gain_or_loss will be recognized by any transferee on any contribution sec_1032 each transferor's basis in the transferee stock received in a contribution in exchange for transferred assets will equal the transferor's basis in the transferred assets immediately before the contribution decreased by the amount of liabilities assumed by the transferee sec_358 and d sec_304 will not apply to any transfer of stock by any transferor to any transferee in any contribution sec_1_1502-80 the first tier contributions based solely on the information submitted and the representations set forth above we rule as follows on the first tier contributions neither i the absence of an actual stock issuance by distributing in the first tier contributions or ii the other steps in the proposed transaction will affect the qualification or treatment of the first tier contributions as exchanges plr-121425-98 described in sec_351 and with respect to subs a3 through a10 as reorganizations under sec_368 sec_351 sec_354 sec_357 revrul_64_155 c b the first distribution based solely on the information submitted and the representations set forth above we rule as follows on the first distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing on its receipt of controlled_corporation stock in the first distribution sec_355 no gain_or_loss will be recognized by distributing on the first distribution sec_355 revrul_62_138 c b the holding_period of the controlled a and controlled b stock received by distributing will include the holding_period of the stock on which the distribution is made sec_1223 earnings_and_profits will be allocated among distributing controlled a and controlled b in accordance with sec_312 sec_1_312-10 and sec_1 f the second distribution based solely on the information submitted and the representations set forth above we rule as follows on the second distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the shareholders of distributing on their receipt of controlled_corporation stock in the second distribution sec_355 no gain_or_loss will be recognized by distributing on the second distribution sec_355 rev_rul the aggregate basis of the stock of controlled a controlled b and distributing including any fractional share of controlled a or controlled b stock in the hands of each distributing shareholder immediately after the second distribution will equal the aggregate basis the shareholder has in distributing stock held immediately before the second distribution this aggregate basis will be allocated among the controlled a controlled b and distributing stock in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 plr-121425-98 the holding_period of the controlled a and controlled b stock including any fractional share of controlled a or controlled b stock received by each distributing shareholder will include the holding_period of distributing stock on which the distribution is made provided the distributing stock is held as a capital_asset on the distribution date sec_1223 earnings_and_profits will be allocated among distributing controlled a and controlled b in accordance with sec_312 sec_1_312-10 and sec_1 e to the extent a distributing shareholder receives cash in exchange for a fractional share of controlled a or controlled b stock gain_or_loss will be recognized by the shareholder measured by the difference between the cash received and the basis of the fractional share of controlled a or controlled b stock as applicable if the fractional share qualifies as a capital_asset in the hands of the shareholder the gain_or_loss will be a capital_gain or loss subject_to the provisions of subchapter_p of chapter of the internal_revenue_code sec_1221 sec_1222 payments made by and among distributing controlled a and controlled b under the indemnity agreements regarding liabilities that i relate to periods ending on or before the second distribution and ii do not become fixed and ascertainable until after the second distribution will be treated as occurring immediately before the second distribution provided that at the time of the distributions the controlled rights remain contingent non-exercisable and subject_to redemption neither the receipt of the controlled rights by distributing in the first distribution nor by distributing 2's shareholders in the second distribution will be a distribution or receipt of property an exchange of stock or property either taxable or nontaxable or any other event that gives rise to the realization of income by distributing distributing or distributing 2's shareholders rev_rul c b the option adjustments based solely on the information submitted we rule as follows on the option adjustments the option adjustments will not be a taxable_event to distributing any entity that is treated as a corporation for federal_income_tax purposes that is owned in whole or in part directly or indirectly by distributing at any time after the distributions hereinafter a distributing 2-related company either controlled_corporation any entity that is treated as a corporation for federal_income_tax purposes that is owned in whole or in part directly or indirectly by a controlled_corporation at plr-121425-98 any time after the distributions hereinafter a controlled-related company or any of the option holders sec_1_83-7 upon exercise of an option i a holder will recognize compensation income in an amount equal to the difference between the fair_market_value of the stock received upon exercise of the option and the exercise price of the option the taxable spread ii with respect to vested options a distributing each distributing 2-related company and each contributed subsidiary will respectively be entitled to a compensation deduction in an amount equal to the taxable spread with respect to vested options that are exercised by persons who were at the time the vested distributing options vested employees of respectively distributing the particular distributing 2-related company or the particular contributed subsidiary as the case may be b holdco a4 will be entitled to a compensation deduction in an amount equal to the taxable spread with respect to vested options that are exercised by persons who were at the time the vested distributing options vested employees of the reorg subs and c distributing will be entitled to a compensation deduction in an amount equal to the taxable spread with respect to vested options that are exercised by persons who were at the time the vested distributing options vested employees of the merger subs iii distributing and each distributing 2-related company will respectively be entitled to a compensation deduction in an amount equal to the taxable spread with respect to unvested distributing options that are exercised by persons who are at the time the unvested distributing options vest employees respectively of distributing or the particular distributing 2-related company as the case may be iv each controlled_corporation and each controlled-related company will respectively be entitled to a compensation deduction in an amount equal to the taxable spread with respect to unvested controlled options that are exercised by persons who are at the time the unvested controlled options vest employees of respectively the particular controlled_corporation or the particular controlled-related company as the case may be and v none of distributing any distributing 2-related company the controlled corporations or any controlled-related company will recognize any taxable_income or gain sec_83 and h and sec_1_83-6 and -7 revrul_80_76 c b other rulings in addition based solely on the information submitted and the representations set forth above we rule as follows the proposed transaction will not result in a change in the ownership or effective_control of a corporation or a change in the ownership of a substantial portion of assets of a corporation within the meaning of sec_280g sec_280g plr-121425-98 for all federal tax purposes i each contribution llc each conversion llc each merger llc each reorg llc and llcs a b g h and l through s will be disregarded as an entity separate from its owner the disregarded entities ii the owner will be treated as direct owner of the assets of the disregarded_entity iii distributions by a disregarded_entity to its owner will be disregarded and iv the merger of disregarded entities that are owned by the same owner will be disregarded no corporation will i cease to be a member of the distributing consolidated_group for federal_income_tax purposes or ii fail to be a member of the controlled a consolidated_group or the controlled b consolidated_group for federal_income_tax purposes provided a valid election to file a consolidated_return is made by those groups as a result of the stock of such corporation being owned by a contribution llc or a merger llc sec_301_7701-2 -2 c i -3 b ii sec_1504 the basis distributing has in the stock of each contributed subsidiary will be increased by the amount of any inter-affiliate debt of such contributed subsidiary that distributing assumes sec_1016 rev_rul we express no opinion on the tax effects of the transaction under other provisions of the code and regulations or the tax effects of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings in particular no ruling was requested and no opinion is expressed regarding a whether any first tier subsidiary merger qualifies as a reorganization under sec_368 b whether any reincorporation qualifies as a reorganization under sec_368 c the validity of any election under sec_301_7701-3 made by any entity involved in the proposed transaction d the tax consequences of the debt payment described in step iii e the tax consequences of the debt recapitalization described in step f the tax consequences of the lease cancellations described in step g the tax consequences of the debt eliminations described in step iv xxiv xliv plr-121425-98 h the subchapter_k implications of the proposed transactions i the entry by distributing the controlled corporations and their affiliates into certain ancillary agreements relating to cost-based transitional services sub-leases of certain office space on a pass-through basis and the royalty-free use by distributing the controlled corporations and their affiliates of intellectual_property owned by another j whether sec_482 applies to the deductions that are the subject of rulings ii a b and c or k the transfer of certain intellectual_property described in step xlix procedural matters this letter is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax return of each affected taxpayer for the tax_year in which the transactions covered by this letter are completed under a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely assistant chief_counsel corporate by wayne t murray senior technician reviewer branch


department of the treasury internal_revenue_service washington d c may uniform issue list and se’t ep raf legend taxpayer a ira b financial_institution c pian d financial_institution e plan f financial_institution g account h financial_institution financial_institution j individual k company l amount amount amount amount i dear this letter is in response to a request for a letter_ruling dated date as supplemented by additional information dated april and from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_402 and sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a was age at the time of the distributions of amount from ira b amount from plan d and amount from plan f collectively amount taxpayer a asserts that her failure to accomplish a rollover of amount sec_1 and within the 60-day period prescribed by sec_408 and sec_402 respectively of the code was due to her depressed condition following the death of her spouse which adversely impacted her ability to manage her financial affairs in addition taxpayer a asserts that her failure to accomplish a rollover of amount within the 60-day period prescribed by sec_402 was due to an error by a financial_institution amount remains in account h and has not been used for any purpose taxpayer a is the surviving_spouse of individual k who maintained ira b with financial_institution c an individual_retirement_annuity under sec_408 of the code and participated in plans d and f cash or deferred arrangements under sec_401 of the code with financial institutions e and g respectively individual k died on date as beneficiary of ira b plan d and plan f taxpayer a received distributions of amount amount and amount on date date and date respectively on date amount was transferred directly into a non-ira account with financial_institution c on date amount was deposited into account h a non-ira account with financial_institution on date taxpayer a received a check totaling amount which was endorsed on date through financial_institution j into account h with financial_institution on date taxpayer a received a check totaling amount which was deposited on date into account h with financial_institution i at the time of the distributions taxpayer a was under severe stress from the loss of her husband she attempted to handle her deceased husband’s estate and financial affairs she does not recall the plan administrators advising her that she was eligible to roll over amount and to an ira her personal financial advisor at financial_institution g had resigned and she was not familiar with her replacement as a result taxpayer a did not know where to seek financial advice in february of taxpayer a's certified_public_accountant informed zvuels oug sake her of her eligibility to rollover amount sec_1 and to an ira in march of taxpayer a met with her new financial advisor to discuss the possible rollover of amount sec_1 and however she was informed she could not deposit amount sec_1 and into an ira because the 60-day rollover period had expired on date taxpayer a received a check totaling amount from plan f on date she met with a financial consultant with company l the consultant concluded that since the 60-day rollover period for amount sec_1 and had already expired amount was ineligible to be rolled over the ruling_request is accompanied by a letter from company l declaring they provided taxpayer a with incorrect information regarding her eligibility to roll over amount based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 and sec_402 of the code with respect to the distributions of amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 of the code received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 of the code states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code sec_401 of the code provides the rules for governing direct transfers of eligible rollover distributions sec_1 a of the income_tax regulations question and answer-15 provides in relevant part that an eligible_rollover_distribution that is paid to an eligible_retirement_plan in a direct_rollover is a distribution and rollover and not a transfer of assets and liabilities revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 and sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer is consistent with her assertion that her failure to accomplish a timely rollover of amount was caused by the combined effects of her inability to manage her financial affairs following the death of her spouse and an error by a financial_institution therefore pursuant to sec_408 and sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b amount from plan d and amount from plan f amount and taxpayer is granted a period of days from the issuance of this letter_ruling to contribute amount into a rollover ira provided all other requirements of sec_408 and sec_402 of the code except the 60-day requirement are met with respect to such contributions amount will be considered a rollover_contribution within the meaning of sec_408 and sec_402 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact if you wish to inquire about i d at sincerely yours c bts a ckbhw manager employee_plans technical group cc enclosures deleted copy of this letter notice of intention to disclose notice