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 b05 plr-112866-11 date september legend distributing distributing distributing distributing distributing controlled controlled ------------------------------------------------------------------- ------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- -------------- -------------------------------------------------- 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------------------------------------------------------------------- ------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- -------------- ------------------------------------------------------------------- ------------------------------------------------------------------- ----------------------- plr-112866-11 fsub stockholder business a business b business c fsub active business fsub active business fsub active business state a state b state c state d state e state f state g state h state i state j state k country country ------------------------------------------------------------------- ---------------------------- ----------------------- ---------------------------------------------------------- --------------------- -------------------------------- ------------------------ ------------------------------------------------------------------- ---------------------- ------------------------------------------------------------------- -------------------- ------------------------------------------------------------------- -------------------------------- ---------- -------------- -------------- -------------- ---------------- -------------------- -------------- ------------------- ------------- ------------ ----------- ------------ -------- plr-112866-11 country country country country country country country country country country country country country country country date date a b c d e f --------------- -------- ---------- ----------------- -------- ------ ------------- ----------- -------------- ------------------ --------------- ----------------- --------------------- ----------- ------ --------------------- ----------------------- ---- ---- ---- -- -------- ---- plr-112866-11 g h i j k l m n o p q r s t -------- ------ ------ -------- -------- ----- ----------------- --------------- -------- ------ ----------------- -- -- ---- dear ---------------- this letter responds to your date letter requesting rulings on certain federal_income_tax consequences of the proposed transactions defined below the material information provided in that letter and in subsequent correspondence is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalties 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 moreover this office has not reviewed any information pertaining to and has made no determination regarding whether any distribution occurring as part of the proposed transactions and for which qualification under sec_355 of the internal_revenue_code the code is sought will i satisfy the business_purpose requirement of sec_1_355-2 ii be used principally as a device for the distribution of the plr-112866-11 earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 and sec_1_355-2 or iii be 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 summary of facts distributing a state a corporation is the common parent of a group of domestic and foreign_corporations the includible affiliates of which join in filing a consolidated federal_income_tax return the distributing group the distributing group engages in business a business b and business c distributing has outstanding one class of common_stock which is widely held and publicly traded distributing common_stock based on public filings with the securities_and_exchange_commission distributing believes that only one stockholder stockholder owns more than percent of its stock stockholder and the other stockholders of distributing common_stock are referred to as the distributing stockholders certain employees of distributing hold distributing common_stock subject_to vesting issued to them in_connection_with_the_performance_of_services the distributing restricted_stock for purposes of this letter the term restricted_stock means stock granted to employees subject_to vesting distributing wholly owns the following entities i distributing a state b holding_company ii sub a state b corporation engaged in business b iii sub a state b holding_company iv sub a state b corporation that owns certain intellectual_property assets used in all three businesses v sub a state c_corporation engaged in business a vi fsub a country entity treated as a corporation for federal tax purposes and engaged in business a vii sub a state d corporation engaged in business a viii sub a state b corporation engaged in business a ix sub a state e corporation engaged in business a x sub a state b corporation engaged in business a xi sub a state f corporation engaged in business a xii sub a state b corporation engaged in business b xiii sub a state b corporation engaged in business b xiv fsub a country entity treated as a corporation for federal tax purposes and engaged in business b xv sub a state g corporation engaged in business b xvi sub a state b corporation engaged in business b xvii sub a state h corporation engaged in business b xviii sub a state b limited_liability_company llc treated as an entity disregarded from its owner for federal tax purposes each such entity a disregarded_entity and engaged in business b xix sub a state b corporation engaged in business b xx sub a state d corporation engaged in business b xxi fsub a country entity treated as a corporation for federal tax purposes and engaged in business b xxii sub a state b llc treated as a corporation for federal tax purposes and engaged in business b xxiii sub a state b holding_company with direct and indirect subsidiaries plr-112866-11 engaged in either business a or business b xxiv sub a state b llc treated as a disregarded_entity and engaged in business b xxv sub a state b corporation engaged in business b xxvi sub a state b corporation engaged in business b xxvii sub a state b corporation engaged in business b xxviii sub a state b corporation engaged in business b xxix sub a state i corporation engaged in business b xxx sub a state b corporation engaged in business c xxxi sub a state f corporation engaged in business c xxxii sub a state i corporation engaged in business c xxxiii sub a state b corporation engaged in business c xxxiv sub a state b corporation engaged in business c xxxv sub a state b corporation engaged in business c xxxvi sub a state b llc treated as a disregarded_entity and engaged in business c and xxxvii fsub a country entity treated as a corporation for federal tax purposes and engaged in business c distributing also owns a percent of sub a state b corporation engaged in business b and b percent of sub a state j corporation engaged in business c sub owns the remaining a percent of sub and third parties own the remaining t percent of sub sub has certain subsidiaries involved in business a the sub business a subsidiaries sub fsub sub sub sub and sub are collectively referred to as the first-tier business a subsidiaries sub sub fsub sub sub sub sub sub sub fsub sub sub sub sub sub sub sub sub and sub are collectively referred to as the first-tier business b subsidiaries sub sub sub sub sub sub sub fsub and sub are collectively referred to as the first-tier business c subsidiaries distributing has only one class of stock outstanding distributing common_stock distributing wholly owns sub a state b corporation engaged in business a sub wholly owns sub a state b holding_company and owns c percent of the equity interests of fsub a country entity treated as a corporation for federal tax purposes and engaged in business a sub owns c percent of the equity of sub a state b limited_partnership treated as a partnership for federal tax purposes and engaged in business a sub owns the remaining d percent of sub sub wholly owns sub a state b corporation engaged in business a sub owns the following interests i all of the equity interests in fsub a country entity treated as a corporation for federal tax purposes ii all of the equity interests in fsub a country entity treated as a corporation for federal tax purposes iii all of the equity interests in sub a state b llc treated as a disregarded_entity iv all of the equity interests in sub a state b llc treated as a disregarded_entity v all the stock of sub a state b corporation vi all of the equity interests in fsub a country entity treated as a corporation for federal tax purposes vii b percent of the equity interests in fsub a country entity treated as a corporation for federal tax purposes viii e percent of the equity interests in fsub a country entity treated as a corporation for federal tax purposes ix c percent of the equity interests in fsub plr-112866-11 a country entity treated as a corporation for federal tax purposes x c percent of the equity interests in fsub a country entity treated as a corporation for federal tax purposes xi b percent of the equity interests in fsub a country entity treated as a corporation for federal tax purposes and xii f percent of the equity interests in fsub a country entity treated as a corporation for federal tax purposes these subsidiaries of sub collectively the sub subsidiaries fsub and fsub each as described below own the remaining equity interests in the sub subsidiaries all of the sub subsidiaries conduct only business a except for fsub which also engages in business b sub wholly owns sub a state b holding_company sub wholly owns i sub a state k corporation ii sub a state f corporation iii sub a state b corporation and iv sub a state b corporation these sub subsidiaries are all engaged in business a sub wholly owns sub a state d corporation engaged in business a sub wholly owns sub a state b corporation that conducts business b sub wholly owns fsub a country entity treated as a corporation for federal tax purposes and engaged in business a sub wholly owns sub a state d corporation engaged in business a sub sub sub sub and sub own g percent h percent i percent j percent and k percent respectively of distributing a state b holding_company distributing has only one class of stock outstanding distributing common_stock distributing directly and indirectly owns approximately l foreign subsidiaries this group of entities the distributing group these subsidiaries engage in all three of the distributing businesses the entities engaged in each business the foreign business a subsidiaries the foreign business b subsidiaries and the foreign business c subsidiaries distributing wholly owns i distributing a country holding_company treated as a corporation for federal tax purposes and ii fsub a country entity treated as a corporation for federal tax purposes and engaged in business a distributing has authorized capital stock consisting of common_stock distributing common_stock and convertible preferred equity certificates cpecs and as issued by distributing distributing cpecs as of date the distributing cpecs had an accrued and unpaid yield of m distributing wholly owns distributing a country holding_company treated as a corporation for federal tax purposes distributing has authorized capital stock consisting of common_stock distributing common_stock and cpecs as issued by distributing distributing cpecs the distributing cpecs in general have the plr-112866-11 same terms as the distributing cpecs as of date the distributing cpecs had an accrued and unpaid yield of n distributing owns all of the equity interests in fsub a country holding_company fsub owns all of the equity interests in fsub a country holding_company fsub owns all of the equity interests in fsub a country entity that conducts business a and business b and fsub a country holding_company except for distributing all of these entities are disregarded for federal tax purposes fsub wholly owns among other entities i fsub a country entity that directly conducts the fsub active business and ii fsub a country entity that directly conducts the fsub active business fsub owns all of the equity interests in fsub a country entity that directly conducts the fsub active business all of these entities are disregarded as separate from distributing for federal tax purposes the fsub active business which is part of business a the fsub active business which is part of business b and the fsub active business which is part of business c will be relied on to satisfy the active_trade_or_business_requirement of sec_355 for the distributions in the proposed transactions seeking qualification under sec_355 financial information has been received indicating that the fsub active business the fsub active business and the fsub active business each has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years business a business b and business c each represent discrete segments of distributing 5’s overall business and each segment has historically exhibited different financial and operating characteristics this has necessitated varying capital_expenditure and acquisition strategies for each business and has resulted in operational inefficiencies owing to the conduct of all three businesses within the same affiliated_group the proposed transactions are designed to separate the businesses from one another and in doing so enable each business i to design and implement the distinct strategies needed to operate in a more efficient manner ii to better align its management’s attention compensation and resources with opportunities in its market and more actively manage its cost structure iii to focus solely on the needs of its customers without dilution arising from a connection to a larger corporate group with tangential goals and incentives iv to structure incentives that reward managers in a manner directly related to the performance of their business unit and provide each business with a more attractive currency for equity-based compensation and iv to use its own stock as acquisition currency and more readily combine with similar pure-play businesses collectively the corporate business purposes the proposed transactions to achieve the corporate business purposes distributing proposes and has partially undertaken the following series of transactions the proposed transactions plr-112866-11 i the distributing group will engage in a series of internal restructuring steps to separate the three business segments now conducted within the distributing group the distributing foreign restructuring the distributing foreign restructuring will primarily involve transactions among disregarded entities and taxable sales for which rulings are not being sought ii following the initial steps of the distributing foreign restructuring described above in step i fsub will contribute or cause its subsidiaries to transfer all of the foreign business b subsidiaries to newly formed controlled a country entity treated as a corporation for federal tax purposes in exchange for common_stock the controlled common_stock and cpecs the controlled cpecs the controlled contribution the controlled cpecs in general will have the same terms as the distributing cpecs as part of the controlled contribution distributing will contribute to controlled approximately dollar_figureq in cash iii fsub will contribute or cause its subsidiaries to transfer all of the foreign business c subsidiaries to newly formed controlled a country entity treated as a corporation for federal tax purposes in exchange for common_stock the controlled common_stock and cpecs the controlled cpecs the controlled contribution and together with the controlled contribution the country contributions the controlled cpecs in general will have the same terms as the distributing cpecs before the country contributions distributing may cause the foreign business b subsidiaries and the foreign business c subsidiaries to be transferred to disregarded entities of distributing that would then be contributed to controlled or controlled as appropriate iv following the country contributions fsub will distribute all of the cpecs and common_stock of controlled and controlled to distributing at the conclusion of the distributing foreign restructuring described in steps i - iv distributing will wholly own three entities fsub which will own the foreign business a subsidiaries controlled which will own the foreign business b subsidiaries and controlled which will own the foreign business c subsidiaries v distributing will distribute all of the controlled cpecs and controlled common_stock to distributing in part as a redemption of distributing cpecs reflecting face_amount and accrued yield equal in value to the controlled equity received therefor and in part as a distribution on distributing common_stock together with the controlled contribution divisive_reorganization vi distributing will distribute all of the controlled cpecs and controlled common_stock to distributing in part as a redemption of distributing cpecs reflecting face_amount and accrued yield equal in value to the controlled plr-112866-11 equity received therefor and in part as a distribution on distributing common_stock together with the controlled contribution divisive_reorganization vii following divisive_reorganization distributing will distribute all of the controlled cpecs and controlled common_stock to distributing in part as a redemption of distributing cpecs reflecting face_amount and accrued yield equal in value to the controlled equity received therefor and in part as a distribution on distributing common_stock distribution viii following divisive_reorganization distributing will distribute all of the controlled cpecs and controlled common_stock to distributing in part as a redemption of distributing cpecs reflecting face_amount and accrued yield equal in value to controlled equity received therefor and in part as a distribution on distributing common_stock distribution ix sub will convert under state law into sub llc a state b llc treated as a disregarded_entity of sub the sub conversion x sub will convert under state law into sub llc a state b llc treated as a disregarded_entity of distributing the sub conversion xi sub will convert under state law into sub llc a state b llc treated as a disregarded_entity of distributing the sub conversion xii sub will convert under state law into sub llc a state b llc treated as a disregarded_entity of distributing the sub conversion and together with the sub llc conversion and the sub conversion the conversions xiii sub will form sub a state b llc treated as a disregarded_entity of sub and transfer all of its assets to sub sub and sub will convert under state law from a corporation and a limited_partnership respectively into state b llcs sub llc and sub llc respectively treated as disregarded entities of distributing xiv sub llc will distribute its c-percent interest in sub llc to sub llc making sub llc the sole owner of sub llc xv sub llc will distribute its l-percent interest in sub to sub llc xvi sub llc will distribute its l-percent interest in sub llc to distributing xvii following the sub conversion sub llc will distribute its k percent of the distributing common_stock to sub plr-112866-11 xviii following the sub conversion sub llc will distribute its j percent of the distributing common_stock to distributing xix following the sub conversion sub llc will distribute its i percent of the distributing common_stock and all the stock of sub to distributing xx following the sub conversion sub llc will distribute its h percent of the distributing common_stock to distributing xxi sub llc will either distribute its assets used in business a and business c to distributing or contribute the business a assets and business c assets to separate llcs treated as disregarded entities and distribute the interests in these entities to distributing the sub asset distribution xxii sub will contribute all of its interests in the sub subsidiaries and any other assets used in business a to a newly formed state b corporation sub in exchange for all the stock of sub xxiii sub will convert under state law into sub llc a state f llc treated as a disregarded_entity of distributing xxiv sub llc will transfer its assets to a disregarded_entity of controlled in exchange for controlled common_stock in a transaction intended to be part of the controlled contribution defined below xxv sub will convert under state law into sub llc a state b llc treated as a disregarded_entity of distributing xxvi sub will convert under state law into sub llc a state b llc treated as a disregarded_entity of distributing xxvii sub llc will distribute the stock of the sub business a subsidiaries to distributing and sub llc and sub llc will distribute the stock it receives to distributing xxviii sub will contribute all the stock of fsub to sub a newly formed state b corporation wholly owned by sub xxix sub will distribute all the stock of sub to sub xxx sub will distribute all the stock of sub to distributing xxxi sub will distribute all the stock of sub to distributing xxxii as part of an integrated transaction with steps xxxiii through xxxiv sub will contribute its o percent share of the distributing common_stock to plr-112866-11 distributing in exchange for distributing common_stock the sub contribution xxxiii distributing will contribute its p percent share of the distributing common_stock its directly owned assets in business b all of its interests in the first-tier business b subsidiaries including sub llc and sub llc all of its equity interests in sub llc and all of its equity interests in sub llc to distributing in exchange for distributing common_stock and the assumption by distributing of certain liabilities associated with the contributed assets the distributing contribution certain business b divisions directly held by distributing will not be contributed directly to distributing in the distributing contribution but will instead be contributed to a series of domestic llcs treated as disregarded entities of distributing or will become disregarded entities of distributing following the distributing contribution xxxiv sub will contribute all the stock of sub to distributing in exchange for distributing common_stock the sub contribution and together with the distributing contribution the distributing contributions xxxv following the distributing contribution distributing will contribute sub llc to sub xxxvi sub will contribute sub llc to sub xxxvii distributing will contribute all of the controlled cpecs and controlled common_stock to newly formed controlled in exchange for stock controlled common_stock and the controlled contribution xxxviii distributing will distribute all of the controlled common_stock to distributing together with the controlled contribution divisive_reorganization xxxix distributing will contribute to distributing all of the stock and equity interests in sub and sub llc and a d-percent equity_interest in fsub the distributing contribution xl distributing will distribute to distributing all of the distributing common_stock in redemption of an equal value of distributing common_stock together with the distributing contribution divisive_reorganization xli distributing will contribute all of the controlled cpecs and controlled common_stock to newly formed controlled a state a corporation in exchange for stock controlled common_stock and controlled contribution plr-112866-11 xlii distributing will distribute all of the controlled common_stock to distributing together with controlled contribution divisive_reorganization divisive_reorganization divisive_reorganization distribution distribution divisive_reorganization divisive_reorganization and divisive_reorganization are referred to collectively as the internal distributions xliii distributing will contribute all the stock of sub to sub xliv distributing will contribute all of its interests in the first-tier business a subsidiaries including sub llc distributing sub and sub all of its equity interests in the sub business a subsidiaries and certain assets used in business a including those received in the sub asset distribution to newly formed controlled a state a corporation in exchange for stock controlled common_stock the controlled cash distribution defined below and the assumption by controlled of certain liabilities associated with the contributed assets the controlled contribution certain business a divisions directly held by distributing will not be contributed directly to controlled in the controlled contribution but will instead be contributed to a series of domestic llcs treated as disregarded entities of controlled xlv sub sub sub sub and sub will merge with and into sub with sub surviving xlvi distributing will contribute to newly formed controlled a state a corporation all of its interests in the first-tier business c subsidiaries and certain assets used in business c including those received in the sub asset distribution in exchange for the controlled cash distribution defined below and the assumption by controlled of certain liabilities associated with the contributed assets controlled contribution xlvii immediately before the external distributions defined below controlled and or its subsidiaries the controlled group and controlled and or its subsidiaries the controlled group will access the public debt markets and or borrow under bank facilities to put in place appropriate capital structures for each group as determined by distributing management based on recommendations from financial advisors xlviii the proceeds of the new public debt and or bank loans will be used in whole or in part to repay the portion of the distributing debt that will not be retained by the distributing group or assumed by the controlled group or the controlled group the proceeds will be distributed by controlled and controlled respectively to distributing in connection with the controlled contribution the controlled cash distribution and controlled contribution the controlled cash distribution plr-112866-11 xlix following the controlled contribution and concurrently with the controlled distribution defined below distributing will distribute all of the controlled common_stock including controlled restricted_stock pro_rata to the distributing stockholders and holders of distributing restricted_stock the controlled distribution and together with the controlled contribution divisive_reorganization l following controlled contribution and concurrently with the controlled distribution distributing will distribute all of the controlled common_stock including controlled restricted_stock pro_rata to the distributing stockholders and holders of distributing restricted_stock the controlled distribution and together with controlled contribution divisive_reorganization divisive_reorganization and divisive_reorganization together are referred to as the external distributions the internal distributions and the external distributions together are referred to as the distributions and each as a distribution no fractional shares of controlled common_stock or controlled common_stock will be issued in the external distributions instead all fractional shares of controlled common_stock and controlled common_stock that distributing stockholders otherwise would be entitled to receive will be aggregated by a transfer agent and as soon as practicable following the effective time of the external distributions will be sold at the prevailing price on the new york stock exchange any distributing stockholder entitled to receive a fractional share of controlled common_stock or controlled common_stock will be entitled to receive a cash payment in an amount equal to the shareholder’s proportionate interest in the net_proceeds from the open market sale li distributing will undergo a reverse_stock_split the reverse_stock_split in connection with the external distributions to adjust the number of shares of distributing common_stock outstanding in the reverse_stock_split distributing will issue one share of new common_stock new distributing common_stock in exchange for a specified number of shares of outstanding distributing common_stock no fractional shares of new distributing common_stock will be issued in the reverse_stock_split and each person otherwise entitled to a fractional share will receive cash in lieu of such share following the external distributions distributing controlled or controlled as the case may be may be required to pay one or both of the other corporations an amount of cash based on the difference between i the actual amount of cash held in bank and other accounts of distributing controlled and controlled immediately following the external distributions and ii the amount in such accounts that was to be retained under the terms of the distribution agreement defined below the post- closing cash adjustments plr-112866-11 in connection with the external distributions distributing controlled and controlled will enter into i a distribution agreement the distribution agreement ii a tax_matters_agreement the tax_matters_agreement iii transition services agreements the transition services agreements iv intellectual_property transfer and license agreements the ip agreements covering among other things trademarks associated with certain brands that will be owned by the distributing group following the external distributions the trademark ip agreements and v master lease and sublease agreements covering certain real_estate collectively with the other agreements the separation agreements in addition distributing controlled and controlled may enter into intercompany supply agreements the intercompany supply agreements the distribution agreement will contain indemnification provisions that are collectively are referred to as the general indemnification agreements the tax_matters_agreement will contain indemnification provisions relating to tax matters including tax_liabilities resulting from certain of the proposed transactions that are collectively referred to as the tax indemnification provisions after the external distributions distributing controlled and controlled will operate as independent companies with separate boards of directors each having at least r members initially it is expected that i s members of the distributing board will also serve on the controlled board but that following a one- to two-year transition_period one of these directors will cease to serve on the distributing board and the other will cease to serve on the controlled board ii s other members of the distributing board will also serve on the controlled board but that following a one- to two-year transition_period d of these directors will cease to serve on the distributing board and the other will cease to serve on the controlled board and iii s other members of the controlled board including its executive chairman will also serve on the controlled board but that following a one- to two-year transition_period d of these directors will cease to serve on the controlled board and the other the executive chairman of the controlled board will cease to serve on the controlled board in each case the members are being asked to serve on multiple boards to reassure the financial markets by providing a sense of business continuity representations the conversions as defined above conversions refers only to the sub conversion sub conversion and sub conversion in the representations that follow the terms parent and subsidiary are defined for each conversion as indicated below conversion parent subsidiary plr-112866-11 sub conversion sub conversion sub conversion distributing distributing distributing sub sub sub distributing has made the following representations for each conversion a parent on the date of adoption of the plan of the conversion the conversion plan date and at all times thereafter until the conversion is completed will own percent of the single outstanding class of subsidiary stock b no shares of subsidiary will have been redeemed during the three years preceding the conversion plan date c the conversion will take place within a single taxable_year d upon the conversion subsidiary will cease to be regarded as a taxable entity separate from parent e subsidiary as a corporation will not retain any assets following the conversion subsidiary will not have acquired assets in any nontaxable_transaction at_f any time except for acquisitions occurring more than three years prior to the conversion plan date g no assets of subsidiary have been or will be disposed of by either subsidiary or parent except for dispositions in the ordinary course of business dispositions occurring more than three years prior to the conversion plan date or dispositions that occur as part of the proposed transactions h prior to the conversion plan date no assets of subsidiary will have been distributed in_kind transferred or sold to parent except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to the conversion plan date subsidiary will report all earned_income represented by assets that will be i deemed distributed to parent such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc the fair_market_value of the assets of subsidiary will exceed its liabilities j both at the conversion plan date and immediately prior to the time the conversion occurs plr-112866-11 the fair_market_value of the assets of subsidiary transferred to parent will k exceed the sum of i the amount of liabilities assumed by parent and ii the amount of liabilities owed to parent by subsidiary there will be no intercorporate debt existing between parent and l subsidiary and none has been canceled forgiven or discounted except for transactions that occurred more than three years prior to the conversion plan date m parent will not be an organization that is exempt from federal_income_tax under sec_501 or another provision of the code n all other transactions undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the conversion have been fully disclosed distributing has made the following additional representation for the sub conversion and the sub conversion the conversion will not be preceded or followed by the reincorporation in o or transfer or sale to a recipient corporation a recipient of any of the businesses or assets of subsidiary if persons holding directly or indirectly more than percent in value of the subsidiary 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 external distributions and by application of the constructive_ownership rules of sec_318 as modified by sec_304 distributing has made the following additional representations for the sub conversion the sub conversion will not be preceded or followed by the p reincorporation transfer or sale of all or a part of the business_assets of sub to another corporation that is the alter ego of sub the fair_market_value of the distributing common_stock deemed q received by distributing in the sub conversion will be approximately equal to the fair_market_value of the sub stock deemed surrendered in the exchange r in the sub conversion distributing will be deemed to acquire a direct interest in the sub business_enterprise through its ownership_interest in sub llc s distributing will be deemed to acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of plr-112866-11 the gross assets held by sub immediately before the sub conversion for purposes of this representation amounts used by sub to pay its reorganization expenses amounts paid_by sub to shareholders who receive cash or other_property and all redemptions and distributions except for regular normal dividends made by sub immediately before the transfer will be included as assets of sub held immediately before the sub conversion t during the five-year period ending on the date of the sub conversion i no person related as defined in sec_1_368-1 to distributing will have acquired sub stock with consideration other than distributing common_stock ii no person related to distributing will have acquired or redeemed sub stock with consideration other than distributing common_stock or sub stock and iii no distribution will have been made with respect to the stock of sub other than ordinary normal regular dividend distributions made pursuant to the historic dividend paying practice of sub either directly or through any transaction agreement or arrangement with any other person u distributing has no plan or intention to sell or otherwise dispose_of any of the assets of sub deemed acquired in the transaction except for dispositions made in the ordinary course of business and transfers described in sec_368 or sec_1_368-2 v sub will be treated as distributing the distributing common_stock deemed received in the sub conversion and its other properties in pursuance of the plan_of_reorganization w the liabilities of sub deemed assumed by distributing within the meaning of sec_357 will have been incurred by sub in the ordinary course of its business and will be associated with the assets deemed transferred to distributing following the transaction distributing will continue either directly or x through one or more members of its qualified_group within the meaning of sec_1_368-1 the historic_business of sub or will use a significant portion of sub 3’s historic_business_assets in a business y distributing will pay or assume the expenses if any of each party incurred in connection with the sub conversion in accordance with the guidelines of revrul_73_54 1973_1_cb_189 there is no intercorporate indebtedness existing between distributing z and sub that was issued acquired or will be settled at a discount 2a no two parties to the sub conversion are investment companies as defined in sec_368 and iv plr-112866-11 2b the total fair_market_value of the assets of sub deemed transferred to distributing in the sub conversion will exceed the sum of i the amount of any liabilities deemed assumed within the meaning of sec_357 by distributing in the exchange ii the amount of any liabilities owed to distributing by sub that are discharged or extinguished in connection with the exchange and iii the amount of cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without recognition of gain received by sub in the exchange the fair_market_value of the assets of distributing will exceed the amount of its liabilities immediately after the sub conversion 2c sub is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 items of income gain loss deduction and credit will be taken into 2d account as required by the applicable intercompany_transaction regulations as a result of the sub conversion 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 2e the sub conversion and the contributions of sub assets to distributing controlled and controlled will be effected pursuant to a single_plan the contributions and distributions in the representations that follow the terms controlled distributing distributing stockholder s and contribution are defined for each distribution as indicated below distribution controlled distributing distributing stockholder s contribution divisive_reorganization divisive_reorganization controlled distributing distributing controlled distributing distributing distribution controlled distributing distributing distribution controlled distributing distributing controlled contribution controlled contribution n a n a plr-112866-11 divisive_reorganization divisive_reorganization divisive_reorganization divisive_reorganization divisive_reorganization controlled distributing distributing distributing distributing distributing controlled distributing distributing controlled contribution distributing contribution controlled contribution controlled distributing controlled distributing distributing stockholders controlled contribution distributing stockholders controlled contribution the term active business refers to the active trade_or_business as defined under sec_355 and related treasury regulations of a particular distributing or controlled as appropriate divisive_reorganization and divisive_reorganization distributing has made the following representations for each of divisive_reorganization and divisive_reorganization distributing controlled and distributing stockholder each will pay their 2f own expenses if any incurred in connection with the distribution the distributing cpecs are equity of distributing for federal_income_tax 2g purposes and distributing has treated them as such since the date of their issuance 2h the controlled cpecs will be equity of controlled for federal_income_tax purposes 2i no part of the consideration distributed in the distribution will be received by distributing stockholder as a creditor employee or in any capacity other than that of an equity holder of distributing the fair_market_value of the controlled cpecs and any controlled 2j common_stock received by distributing stockholder will be approximately equal to the fair_market_value of the distributing cpecs and any distributing common_stock surrendered by distributing stockholder in the exchange plr-112866-11 2k distributing and controlled will each treat all members of its separate_affiliated_group as defined in sec_355 sag as one corporation in determining whether it meets the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business the five years of financial information submitted on behalf of the 2l distributing active business is representative of the present operations of the distributing active business and there have been no substantial operational changes since the date of the last financial statements submitted 2m the five years of financial information submitted on behalf of the controlled active business is representative of the present operations of the controlled active business and there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution distributing will be the parent of a sag 2n that is engaged in an active trade_or_business under sec_355 immediately after the distribution controlled will be the parent of a sag 2o that is engaged in an active trade_or_business under sec_355 2p neither the distributing active business nor control of an entity conducting this business will have been acquired during the five-year period immediately preceding the distribution the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business 2q neither the controlled active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business except for certain services to be provided under the separation 2r agreements following the distribution distributing and controlled will each continue the conduct of its active business independently and with its separate employees the distribution is being carried out to facilitate the external distribution to 2s which it relates each of which is being carried out for the corporate business purposes the distribution is motivated in whole or in substantial part by one or more of the corporate business purposes plr-112866-11 the distribution is not used principally as a device for the distribution of 2t the earnings_and_profits of distributing or controlled or both 2u the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing in the contribution each will equal or exceed the sum of i the total amount of any liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors in connection with the reorganization 2v any liabilities assumed as determined under sec_357 by controlled in the contribution will have been incurred in the ordinary course of business and will be associated with the assets transferred 2w the total fair_market_value of the assets transferred to controlled in the contribution will exceed the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the contribution and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution the aggregate fair_market_value of the assets distributing transfers to 2x controlled in the contribution will equal or exceed the aggregate adjusted_basis of those assets there is no plan or intention to liquidate distributing or any other member 2y of the distributing sag engaged in the active trade_or_business or controlled or any other member of the controlled sag engaged in the active trade_or_business to merge any of these corporations with any other corporation or to sell or otherwise dispose_of the assets of any of these corporations after the distribution except in the ordinary course of business or as part of the proposed transactions 2z distributing will neither accumulate its receivables nor make extraordinary payment of its payables in anticipation of the distribution 3a no property will be transferred by distributing to controlled for which an investment_credit allowed under sec_46 has been or will be claimed plr-112866-11 3b no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to the distribution other than any indebtedness that has arisen in the ordinary course of business or that may arise after the distribution in connection with a separation agreement or an intercompany supply agreement 3c any indebtedness between distributing and controlled after the distribution will not constitute stock_or_securities 3d apart from certain payments made under the trademark ip agreements and the transition services agreements payments made in connection with any continuing transactions between or among distributing or any of its subsidiaries controlled or any of its subsidiaries and controlled or any of its subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 3e no two parties to the distribution are investment companies as defined in sec_368 and iv 3f for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold equity interests possessing percent or more of the total combined voting power of all classes of distributing equity interests entitled to vote or percent or more of the total value of all classes of distributing equity interests that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 3g for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold equity interests possessing percent or more of the total combined voting power of all classes of controlled equity interests entitled to vote or percent or more of the total value of all classes of controlled equity interests that were either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 or ii attributable to distributions on distributing equity interests that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 3h 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 equity interests possessing percent or more of the total combined voting power of all classes of equity interests of distributing or controlled or equity interests possessing percent or more of the plr-112866-11 total value of all classes of equity interests of distributing or controlled including any predecessor or successor of such corporation immediately following the distribution taking into account section 3i g either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled ii if any person holds a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the transaction or iii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 distributing and controlled will be controlled_foreign_corporations within 3j the meaning of sec_957 immediately before and after in the case of distributing and immediately after in the case of controlled the contribution 3k distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to each of distributing stockholder distributing and controlled immediately before and after in the case of distributing stockholder and distributing and immediately after in the case of controlled the contribution distributing and controlled will be controlled_foreign_corporations within 3l the meaning of sec_957 immediately before and after the distribution 3m distributing will be a sec_1248 shareholder within the meaning of sec_1_367_b_-2 with respect to each of distributing stockholder distributing and controlled immediately before and after the distribution 3n neither distributing nor controlled will have been a u s real_property holding corporation as defined in sec_897 at any time during the five- year period 3o neither distributing nor controlled will be a u s real_property holding corporation immediately after the distribution 3p controlled will not hold any u s real_property interests as defined in sec_897 immediately before or after the distribution there is no declared and unpaid yield with respect to the distributing 3q cpecs distribution and distribution distributing has made the following representations for each of distribution and distribution plr-112866-11 distributing controlled and distributing stockholder each will pay their 3r own expenses if any incurred in connection with the distribution the distributing cpecs are equity of distributing for federal_income_tax 3s purposes and distributing has treated them as such since the date of their issuance the controlled cpecs will be equity of controlled for federal_income_tax 3t purposes 3u no part of the consideration distributed in the distribution will be received by distributing stockholder as a creditor employee or in any capacity other than that of an equity holder of distributing the fair_market_value of the controlled cpecs and any controlled 3v common_stock received by distributing stockholder will be approximately equal to the fair_market_value of the distributing cpecs and any distributing common_stock surrendered by distributing stockholder in the exchange 3w distributing and controlled will each treat all members of its sag as one corporation in determining whether it meets the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business the five years of financial information submitted on behalf of the 3x distributing active business is representative of the present operations of the distributing active business and there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted on behalf of the 3y controlled active business is representative of the present operations of the controlled active business and there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution distributing will be the parent of a sag 3z that is engaged in an active trade_or_business under sec_355 immediately after the distribution controlled will be the parent of a sag 4a that is engaged in an active trade_or_business under sec_355 4b neither the distributing active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business plr-112866-11 4c neither the controlled active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business 4d except for certain services to be provided under the separation agreements following the distribution distributing and controlled will each continue the conduct of its active business independently and with its separate employees 4e the distribution is being carried out to facilitate the external distribution to which it relates each of which is being carried out for the corporate business purposes the distribution is motivated in whole or in substantial part by one or more of the corporate business purposes the distribution is not used principally as a device for the distribution of 4f the earnings_and_profits of distributing or controlled or both there is no plan or intention to liquidate distributing or any other member 4g of the distributing sag engaged in the active trade_or_business or controlled or any other member of the controlled sag engaged in the active trade_or_business to merge any of these corporations with any other corporation or to sell or otherwise dispose_of the assets of any of these corporations after the distribution except in the ordinary course of business or as part of the proposed transactions 4h distributing will neither accumulate its receivables nor make extraordinary payment of its payables in anticipation of the distribution 4i no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to the distribution other than any indebtedness that has arisen in the ordinary course of business or that may arise after the distribution in connection with a separation agreement or an intercompany supply agreement any indebtedness between distributing and controlled after the 4j distribution will not constitute stock_or_securities 4k apart from certain payments made under the trademark ip agreements and the transition services agreements payments made in connection with any continuing transactions between or among distributing or any of its subsidiaries controlled or any of its subsidiaries and controlled or any of its plr-112866-11 subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the distribution are investment companies as defined in 4l sec_368 and iv 4m for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold equity interests possessing percent or more of the total combined voting power of all classes of distributing equity interests entitled to vote or percent or more of the total value of all classes of distributing equity interests that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 4n for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold equity interests possessing percent or more of the total combined voting power of all classes of controlled equity interests entitled to vote or percent or more of the total value of all classes of controlled equity interests that were either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 or ii attributable to distributions on distributing equity interests that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 4o 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 equity interests possessing percent or more of the total combined voting power of all classes of equity interests of distributing or controlled or equity interests possessing percent or more of the total value of all classes of equity interests of distributing or controlled including any predecessor or successor of such corporation immediately following the distribution taking into account section 4p g either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled ii if any person holds a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the transaction or iii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 4q distributing and controlled will be controlled_foreign_corporations within the meaning of sec_957 immediately before and after in the case of distributing and immediately after in the case of controlled the distribution plr-112866-11 distributing stockholder will be a sec_1248 shareholder within the 4r meaning of sec_1_367_b_-2 with respect to each of distributing and controlled immediately before and after in the case of distributing and immediately after in the case of controlled the distribution 4s neither distributing nor controlled will have been a u s real_property holding corporation as defined in sec_897 at any time during the five- year period neither distributing nor controlled will be a u s real_property holding 4t corporation immediately after the distribution 4u controlled will not hold any u s real_property interests as defined in sec_897 immediately before or after the distribution there is no declared and unpaid yield with respect to the distributing 4v cpecs divisive_reorganization and divisive_reorganization distributing has made the following representations for each of divisive_reorganization and divisive_reorganization 4w distributing controlled and distributing stockholder each will pay their own expenses if any incurred in connection with the distribution 4x no part of the consideration distributed in the distribution will be received by distributing stockholder as a creditor employee or in any capacity other than that of a stockholder of distributing 4y distributing and controlled will each treat all members of its sag as one corporation in determining whether it meets the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business the five years of financial information submitted on behalf of the 4z distributing active business is representative of the present operations of the distributing active business and there have been no substantial operational changes since the date of the last financial statements submitted 5a the five years of financial information submitted on behalf of the controlled active business is representative of the present operations of the controlled active business and there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution distributing will be the parent of a sag 5b that is engaged in an active trade_or_business under sec_355 plr-112866-11 immediately after the distribution controlled will be the parent of a sag 5c that is engaged in an active trade_or_business under sec_355 5d neither the distributing active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business 5e neither the controlled active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business except for certain services to be provided under the separation 5f agreements following the distribution distributing and controlled will each continue the conduct of its active business independently and with its separate employees the distribution is being carried out to facilitate the external distribution to 5g which it relates each of which is being carried out for the corporate business purposes the distribution is motivated in whole or in substantial part by one or more of the corporate business purposes 5h the distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both the total adjusted_basis and the fair_market_value of the assets transferred 5i to controlled by distributing in the contribution each will equal or exceed the sum of i the total amount of any liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors in connection with the reorganization any liabilities assumed as determined under sec_357 by 5j controlled in the contribution will have been incurred in the ordinary course of business and will be associated with the assets transferred the total fair_market_value of the assets transferred to controlled in the 5k contribution will exceed the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the plr-112866-11 contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the contribution and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution the aggregate fair_market_value of the assets distributing transfers to 5l controlled in the contribution will equal or exceed the aggregate adjusted_basis of these assets 5m there is no plan or intention to liquidate distributing or any other member of the distributing sag engaged in the active trade_or_business or controlled or any other member of the controlled sag engaged in the active trade_or_business to merge any of these corporations with any other corporation or to sell or otherwise dispose_of the assets of any of these corporations after the distribution except in the ordinary course of business or as part of the proposed transactions 5n distributing will neither accumulate its receivables nor make extraordinary payment of its payables in anticipation of the distribution 5o no property will be transferred by distributing to controlled for which an investment_credit allowed under sec_46 has been or will be claimed 5p no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to the distribution other than any indebtedness that has arisen in the ordinary course of business or that may arise after the distribution in connection with a separation agreement or an intercompany supply agreement immediately before the distribution items of income gain loss deduction 5q 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 distributing may have in the controlled common_stock or the stock of any direct or indirect subsidiary of controlled will be included in income immediately before the distribution to the extent required by treasury regulations see sec_1_1502-19 at the time of the distribution distributing will not have an excess_loss_account in the controlled common_stock or the stock of any direct or indirect subsidiary of controlled plr-112866-11 any indebtedness between distributing and controlled after the 5r distribution will not constitute stock_or_securities 5s apart from certain payments made under the trademark ip agreements and the transition services agreements payments made in connection with any continuing transactions between or among distributing or any of its subsidiaries controlled or any of its subsidiaries and controlled or any of its subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the distribution are investment companies as defined in 5t sec_368 and iv 5u for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of 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 for purposes of sec_355 immediately after the distribution no 5v person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of 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 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 5w 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 possessing percent or more of the total combined voting power of all classes of stock of distributing or controlled or stock possessing percent or more of the total value of all classes of stock of distributing or controlled including any predecessor or successor of such corporation immediately following the distribution taking into account section 5x g either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled ii if any person holds a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before plr-112866-11 the transaction or iii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 divisive_reorganization distributing has made the following representations for divisive_reorganization 5y distributing controlled and distributing stockholder each will pay their own expenses if any incurred in connection with the distribution 5z no part of the consideration distributed in the distribution will be received by distributing stockholder as a creditor employee or in any capacity other than that of a stockholder of distributing 6a the fair_market_value of the controlled common_stock to be received by distributing stockholder will be approximately equal to the fair_market_value of the distributing common_stock surrendered by distributing stockholder in the exchange 6b distributing and controlled will each treat all members of its sag as one corporation in determining whether it meets the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business the five years of financial information submitted on behalf of the 6c distributing active business is representative of the present operations of the distributing active business and there have been no substantial operational changes since the date of the last financial statements submitted 6d the five years of financial information submitted on behalf of the controlled active business is representative of the present operations of the controlled active business and there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution distributing will be the parent of a sag 6e that is engaged in an active trade_or_business under sec_355 immediately after the distribution controlled will be the parent of a sag 6f that is engaged in an active trade_or_business under sec_355 6g neither the distributing active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business plr-112866-11 6h neither the controlled active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business except for certain services to be provided under the separation 6i agreements following the distribution distributing and controlled will each continue the conduct of its active business independently and with its separate employees the distribution is being carried out to facilitate the external distribution to 6j which it relates each of which is being carried out for the corporate business purposes the distribution is motivated in whole or in substantial part by one or more of the corporate business purposes the distribution is not used principally as a device for the distribution of 6k the earnings_and_profits of distributing or controlled or both the total adjusted_basis and the fair_market_value of the assets transferred 6l to controlled by distributing in the contribution each will equal or exceed the sum of i the total amount of any liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors in connection with the reorganization 6m any liabilities assumed as determined under sec_357 by controlled in the contribution will have been incurred in the ordinary course of business and will be associated with the assets transferred 6n the total fair_market_value of the assets transferred to controlled in the contribution will exceed the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the contribution and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution plr-112866-11 6o the aggregate fair_market_value of the assets distributing transfers to controlled in the contribution will equal or exceed the aggregate adjusted_basis of these assets 6p there is no plan or intention to liquidate distributing or any other member of the distributing sag engaged in the active trade_or_business or controlled or any other member of the controlled sag engaged in the active trade_or_business to merge any of these corporations with any other corporation or to sell or otherwise dispose_of the assets of any of these corporations after the distribution except in the ordinary course of business or as part of the proposed transactions 6q distributing will neither accumulate its receivables nor make extraordinary payment of its payables in anticipation of the distribution no property will be transferred by distributing to controlled for which an 6r investment_credit allowed under sec_46 has been or will be claimed 6s no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to the distribution other than any indebtedness that has arisen in the ordinary course of business or that may arise after the distribution in connection with a separation agreement or an intercompany supply agreement 6t immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d further any excess_loss_account distributing may have in the controlled common_stock or the stock of any direct or indirect subsidiary of controlled will be included in income immediately before the distribution to the extent required by treasury regulations see sec_1_1502-19 at the time of the distribution distributing will not have an excess_loss_account in the controlled common_stock or the stock of any direct or indirect subsidiary of controlled 6u any indebtedness between distributing and controlled after the distribution will not constitute stock_or_securities 6v apart from certain payments made under the trademark ip agreements and the transition services agreements payments made in connection with any continuing transactions between or among distributing or any of its subsidiaries controlled or any of its subsidiaries and controlled or any of its plr-112866-11 subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 6w no two parties to the distribution are investment companies as defined in sec_368 and iv for purposes of sec_355 immediately after the distribution no 6x person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of 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 for purposes of sec_355 immediately after the distribution no 6y person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of 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 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 the distribution is not part of a plan or series of related transactions 6z within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of distributing or controlled or stock possessing percent or more of the total value of all classes of stock of distributing or controlled including any predecessor or successor of such corporation immediately following the distribution taking into account section 7a g either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled ii if any person holds a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the transaction or iii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 7b there is no regulatory legal contractual or economic compulsion or requirement that distributing make part or all of the distributing contribution to distributing as a condition to the distribution plr-112866-11 divisive_reorganization and divisive_reorganization distributing has made the following representations for divisive_reorganization and divisive_reorganization 7c distributing controlled and distributing stockholder each will pay their own expenses if any incurred in connection with the distribution 7d except for the controlled restricted_stock that holders of distributing restricted_stock will receive in the same proportion as other distributing stockholders restricted_stock distribution no part of the consideration distributed in the distribution will be received by a distributing stockholder as a creditor employee or in any capacity other than that of a stockholder of distributing in no event will the restricted_stock distribution represent more than percent of the controlled stock restricted and unrestricted in the distribution 7e distributing and controlled will each treat all members of its sag as one corporation in determining whether it meets the requirements of sec_355 regarding the active_conduct_of_a_trade_or_business the five years of financial information submitted on behalf of the 7f distributing active business is representative of the present operations of the distributing active business and there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted on behalf of the 7g controlled active business is representative of the present operations of the controlled active business and there have been no substantial operational changes since the date of the last financial statements submitted immediately after the distribution distributing will be the parent of a sag 7h that is engaged in an active trade_or_business under sec_355 immediately after the distribution controlled will be the parent of a sag 7i that is engaged in an active trade_or_business under sec_355 neither the distributing active business nor control of an entity conducting 7j this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business plr-112866-11 7k neither the controlled active business nor control of an entity conducting this business will have been acquired during the five-year period in a transaction in which gain_or_loss was recognized or treated as recognized in whole or in part except in connection with transfers between members of an affiliated_group within the meaning of sec_1_355-3 or in connection with the expansion of an existing five-year trade_or_business except for certain services to be provided under the separation 7l agreements following the distribution distributing and controlled will each continue the conduct of its active business independently and with its separate employees 7m the distribution is being carried out for the corporate business purposes the distribution is motivated in whole or in substantial part by one or more of the corporate business purposes 7n the distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both 7o the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing in the contribution each will equal or exceed the sum of i the total amount of any liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors in connection with the reorganization 7p any liabilities assumed as determined under sec_357 by controlled in the contribution will have been incurred in the ordinary course of business and will be associated with the assets transferred the total fair_market_value of the assets transferred to controlled in the 7q contribution will exceed the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the contribution ii the amount of any liabilities owed to controlled by distributing that are discharged or extinguished in connection with the contribution and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the contribution the fair_market_value of the assets of controlled will exceed the amount of its liabilities immediately after the contribution the aggregate fair_market_value of the assets distributing transfers to 7r controlled in the contribution will equal or exceed the aggregate adjusted_basis of these assets plr-112866-11 there is no plan or intention to liquidate distributing or any other member 7s of the distributing sag engaged in the active trade_or_business or controlled or any other member of the controlled sag engaged in the active trade_or_business to merge any of these corporations with any other corporation or to sell or otherwise dispose_of the assets of any of these corporations after the distribution except in the ordinary course of business or as part of the proposed transactions distributing will neither accumulate its receivables nor make extraordinary 7t payment of its payables in anticipation of the distribution 7u no property will be transferred by distributing to controlled for which an investment_credit allowed under sec_46 has been or will be claimed 7v no intercorporate debt will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or subsequent to the distribution other than any indebtedness that has arisen in the ordinary course of business or that may arise after the distribution in connection with a separation agreement or an intercompany supply agreement immediately before the distribution items of income gain loss deduction 7w 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 distributing may have in the controlled common_stock or the stock of any direct or indirect subsidiary of controlled will be included in income immediately before the distribution to the extent required by treasury regulations see sec_1_1502-19 at the time of the distribution distributing will not have an excess_loss_account in the controlled common_stock or the stock of any direct or indirect subsidiary of controlled 7x any indebtedness between distributing and controlled after the distribution will not constitute stock_or_securities 7y apart from certain payments made under the trademark ip agreements and the transition services agreements payments made in connection with any continuing transactions between or among distributing or any of its subsidiaries controlled or any of its subsidiaries and other controlled or any of its subsidiaries will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length 7z no two parties to the distribution are investment companies as defined in sec_368 and iv plr-112866-11 8a for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of 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 8b for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of 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 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 the distribution is not part of a plan or series of related transactions 8c within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of distributing or controlled or stock possessing percent or more of the total value of all classes of stock of distributing or controlled including any predecessor or successor of such corporation immediately following the distribution taking into account section 8d g either i no person will hold a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled ii if any person holds a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the transaction or iii neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 8e the reverse_stock_split will qualify as a reorganization under sec_368 distributing has made the following additional representation for divisive_reorganization and divisive_reorganization in combination the distributing debt repaid with the controlled cash distribution and 8f the controlled cash distribution will not exceed in the aggregate the weighted quarterly average of the distributing debt owed to third parties for the twelve- month period ending on the close of business on date the last business_day plr-112866-11 before the date on which the distributing board_of directors authorized distributing to pursue the distributions actively rulings the conversions the following rulings incorporate the definitions of parent and subsidiary set forth in the table above sub and sub conversions based solely on the information and representations submitted we rule as follows on each of the sub conversion and the sub conversion the conversion will be treated as a distribution by subsidiary to parent in complete_liquidation under sec_332 no gain_or_loss will be recognized by parent on the deemed receipt of the assets and liabilities of subsidiary in the conversion sec_332 no gain_or_loss will be recognized by subsidiary on the deemed_distribution of its assets and liabilities to parent in the conversion sec_337 the basis of each asset of subsidiary deemed received by parent in the conversion will equal the basis of that asset in the hands of subsidiary immediately before the conversion sec_334 the holding_period of each asset of subsidiary deemed received by parent in the conversion will include the period during which subsidiary held the asset sec_1223 parent will succeed to and take into account the items of subsidiary described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 sec_384 sec_1502 and the treasury regulations thereunder sec_381 and sec_1 a - except to the extent subsidiary’s earnings_and_profits are reflected in parent’s earnings_and_profits parent will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of subsidiary as of the date of the conversion sec_381 and sec_1_381_c_2_-1 and sec_1_1502-33 any deficit in the earnings_and_profits of subsidiary will be used only to offset earnings_and_profits accumulated after the date of the conversion sec_381 plr-112866-11 the sub conversion based solely on the information and representations submitted we rule as follows on the sub conversion no gain_or_loss will be recognized by distributing on its deemed receipt of sub assets and deemed assumption of sub liabilities in the sub conversion no gain_or_loss will be recognized by sub on the deemed_distribution of its assets to distributing and deemed assumption of its liabilities by distributing in the sub conversion the basis of each asset of sub deemed received by distributing in the sub conversion will equal the basis of that asset in the hands of sub immediately before the sub conversion the holding_period of each asset of sub deemed received by distributing in the sub conversion will include the period during which sub held the asset sec_1223 distributing will succeed to and take into account the items of sub described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 sec_384 sec_1502 and the treasury regulations thereunder sec_381 and sec_1_381_a_-1 except to the extent the earnings_and_profits of sub are reflected in distributing 5’s earnings_and_profits distributing will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of sub as of the date of the sub conversion sec_381 and sec_1_381_c_2_-1 and sec_1_1502-33 any deficit in the earnings_and_profits of sub will be used only to offset earnings_and_profits accumulated after the date of the sub conversion sec_381 the contributions and distributions the following rulings incorporate the definitions of distributing distributing stockholder controlled and contribution set forth in the table above in addition other controlled means i controlled or controlled as applicable in the case the of the divisive_reorganization divisive_reorganization distribution and distribution and ii controlled or controlled as applicable in the case of the external distributions divisive_reorganization and divisive_reorganization plr-112866-11 based solely on the information and representations submitted we rule as follows on each of divisive_reorganization and divisive_reorganization the contribution and distribution together will qualify as a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize gain_or_loss in the contribution sec_361 and sec_357 controlled will not recognize gain_or_loss in the contribution sec_1032 controlled’s basis in each asset received from distributing in the contribution will equal the basis of that asset in the hands of distributing immediately before its transfer to controlled sec_362 controlled’s holding_period for each asset received from distributing will include the period during which distributing held or was deemed to hold that asset sec_1223 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing stockholder upon its receipt of controlled cpecs and controlled common_stock in the distribution sec_355 no gain_or_loss will be recognized by distributing upon its distribution of controlled cpecs and controlled common_stock in the distribution sec_361 the aggregate basis of the controlled cpecs and controlled common_stock exchanged for distributing cpecs or distributing common_stock in the hands of distributing stockholder will equal distributing stockholder’s adjusted_basis in the distributing cpecs or distributing common_stock as applicable surrendered in the distribution sec_358 and b and sec_1_358-2 to the extent the controlled cpecs and controlled common_stock are not exchanged for distributing cpecs or distributing common_stock and the distribution is instead made with respect to distributing common_stock the aggregate basis of the controlled cpecs controlled common_stock other controlled cpecs other controlled common_stock and distributing common_stock in the hands of distributing stockholder will equal the distributing stockholder’s adjusted_basis in the distributing common_stock with respect to which the distribution is made allocated in proportion to the fair market values of the controlled cpecs controlled common_stock other controlled cpecs plr-112866-11 other controlled common_stock and distributing common_stock sec_358 and b and sec_1_358-2 the holding_period of the controlled cpecs and controlled common_stock received by distributing stockholder in the distribution will include in each case the holding_period of the distributing cpecs and controlled common_stock exchanged therefor or with respect to which the distribution is made provided the distributing cpecs and distributing common_stock are held as capital assets on the date of the distribution sec_1223 as provided in sec_312 proper allocation of earnings_and_profits among distributing controlled and other controlled will be made under sec_1_312-10 and c the contribution will be an exchange to which sec_1_367_b_-1 and sec_1 b - a apply no amount will be included in income as a deemed_dividend equal to the sec_1248 amount under sec_367 as a result of the contribution the distribution will be an exchange to which sec_1_367_b_-1 sec_1_367_b_-5 and sec_1_367_b_-5 apply if distributing stockholder’s postdistribution amount as defined in sec_1_367_b_-5 with respect to distributing or controlled is less than its predistribution amount as defined in sec_1_367_b_-5 with respect to distributing or controlled distributing stockholder’s basis in its controlled equity interests and distributing equity interests immediately after the distribution must be reduced by the amount of the difference however distributing stockholder’s basis in such equity interests must not be reduced below zero and to the extent the foregoing reduction would reduce its basis below zero distributing stockholder must instead include such amount in income as a deemed_dividend from such corporation if distributing stockholder reduces its basis in the equity interests of distributing or controlled or has an inclusion with respect to such equity interests distributing stockholder must increase its basis in the equity interests of the other corporation to the extent provided in sec_1_367_b_-5 distribution and distribution based solely on the information and representations submitted we rule as follows on each of distribution and distribution no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing stockholder upon its receipt of controlled cpecs and controlled common_stock in the distribution sec_355 plr-112866-11 no gain_or_loss will be recognized by distributing upon its distribution of controlled cpecs and controlled common_stock in the distribution sec_355 the aggregate basis of the controlled cpecs and controlled common_stock exchanged for distributing cpecs or distributing common_stock in the hands of distributing stockholder will equal distributing stockholder’s adjusted_basis in the distributing cpecs or distributing common_stock as applicable surrendered in the distribution sec_358 and b and sec_1_358-2 to the extent the controlled cpecs and controlled common_stock are not exchanged for distributing cpecs or distributing common_stock and the distribution is instead made with respect to distributing common_stock the aggregate basis of the controlled cpecs controlled common_stock other controlled cpecs other controlled common_stock and distributing common_stock in the hands of distributing stockholder will equal the distributing stockholder’s adjusted_basis in the distributing common_stock with respect to which the distribution is made allocated in proportion to the fair market values of the controlled cpecs controlled common_stock other controlled cpecs other controlled common_stock and distributing common_stock sec_358 and b and sec_1_358-2 the holding_period of the controlled cpecs and controlled common_stock received by distributing stockholder in the distribution will include the holding_period of the distributing cpecs and controlled common_stock exchanged therefor or with respect to which the distribution is made provided the distributing cpecs and distributing common_stock are held as capital assets on the date of the distribution sec_1223 as provided in sec_312 proper allocation of earnings_and_profits among distributing controlled and other controlled will be made under sec_1_312-10 and c the distribution will be an exchange to which sec_1_367_b_-1 sec_1_367_b_-5 and sec_1_367_b_-5 apply if distributing stockholder’s postdistribution amount as defined in sec_1_367_b_-5 with respect to distributing or controlled is less than its predistribution amount as defined in sec_1_367_b_-5 with respect to distributing or controlled distributing stockholder’s basis in its controlled equity interests and distributing equity interests immediately after the distribution must be reduced by the amount of the difference however distributing stockholder’s basis in such equity interests must not be reduced below zero and to the extent the foregoing reduction would reduce its basis below zero distributing stockholder must instead include such amount in income as a deemed_dividend from such plr-112866-11 corporation if distributing stockholder reduces its basis in the equity interests of distributing or controlled or has an inclusion with respect to such equity interests distributing stockholder must increase its basis in the equity interests of the other corporation to the extent provided in sec_1_367_b_-5 divisive_reorganization and divisive_reorganization based solely on the information and representations submitted we rule as follows on each of divisive_reorganization and divisive_reorganization the contribution and the distribution together will qualify as a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize gain_or_loss in the contribution sec_361 and sec_357 controlled will not recognize gain_or_loss in the contribution sec_1032 controlled’s basis in each asset received from distributing in the contribution will equal the basis of that asset in the hands of distributing immediately before its transfer to controlled sec_362 controlled’s holding_period for each asset received from distributing will include the period during which distributing held or was deemed to hold that asset sec_1223 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing stockholder upon its receipt of controlled common_stock in the distribution sec_355 no gain_or_loss will be recognized by distributing upon its distribution of controlled common_stock in the distribution sec_361 the aggregate basis of the controlled common_stock and distributing common_stock in the hands of distributing stockholder will equal distributing stockholder’s basis in the distributing common_stock immediately before the distribution allocated in proportion to the fair market values of the controlled common_stock and distributing common_stock sec_358 and b and sec_1_358-2 the holding_period of the controlled common_stock received by distributing stockholder in the distribution will include the holding_period of the distributing common_stock with respect to which the distribution is made plr-112866-11 provided the distributing stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1 f divisive_reorganization based solely on the information and representations submitted we rule as follows on divisive_reorganization the contribution and distribution together will qualify as a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 the distributing contribution will not be treated as having been received by distributing in exchange for controlled common_stock distributed by distributing in the distribution distributing will not recognize gain_or_loss in the contribution sec_361 and sec_357 controlled will not recognize gain_or_loss in the contribution sec_1032 controlled’s basis in each asset received from distributing in the contribution will equal the basis of that asset in the hands of distributing immediately before its transfer to controlled sec_362 controlled’s holding_period for each asset received from distributing will include the period during which distributing held or was deemed to hold that asset sec_1223 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of distributing stockholder upon its receipt of controlled common_stock in the distribution sec_355 no gain_or_loss will be recognized by distributing upon its distribution of controlled common_stock in the distribution sec_361 the aggregate basis of the controlled common_stock in the hands of distributing stockholder will equal distributing stockholder’s adjusted_basis in distributing common_stock surrendered in the distribution sec_358 and b and sec_1_358-2 plr-112866-11 the holding_period of the controlled common_stock received by distributing stockholder in the distribution will include the holding_period of the distributing common_stock exchanged therefor provided the distributing common_stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 and sec_1 f the contribution by distributing stockholder of its p-percent share of the controlled common_stock to distributing in the distributing contribution will be disregarded for federal_income_tax purposes and treated as if distributing stockholder had retained the p-percent share of the controlled common_stock see revrul_63_260 c b divisive_reorganization and divisive_reorganization based solely on the information and representations submitted we rule as follows on each of divisive_reorganization and divisive_reorganization the contribution and the distribution together will qualify as a reorganization within the meaning of sec_368 distributing and controlled will each be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize gain_or_loss in the contribution sec_361 sec_361 and sec_357 controlled will not recognize gain_or_loss in the contribution sec_1032 controlled’s basis in each asset received from distributing in the contribution will equal the basis of that asset in the hands of distributing immediately before its transfer to controlled sec_362 controlled’s holding_period for each asset received from distributing will include the period during which distributing held or was deemed to hold that asset sec_1223 provided that controlled is a member of distributing's dsag within the meaning of sec_1_355-2t g after the issuance of controlled common_stock by controlled to distributing in exchange for the ip agreements no gain_or_loss will be recognized by and no amount will otherwise be included in the income of a distributing stockholder upon its receipt of plr-112866-11 controlled common_stock in the distribution sec_355 and sec_355 will not treat as other_property any part of the controlled common_stock issued by controlled to distributing in exchange for the ip agreements no gain_or_loss will be recognized by distributing upon its distribution of controlled common_stock in the distribution sec_361 each distributing stockholder’s basis in a share of distributing common_stock as adjusted under sec_1_358-1 with respect to which the external distributions are made shall be allocated among that share of distributing common_stock and the shares of controlled common_stock and other controlled common_stock received with respect to that share of distributing common_stock in proportion to the fair market values of each if a distributing stockholder that purchased or acquired shares of distributing common_stock on different dates or at different prices is not able to identify which particular share of controlled common_stock or other controlled common_stock or portion thereof is received with respect to a particular share of distributing common_stock or portion thereof the distributing stockholder may designate which share of controlled common_stock or other controlled common_stock is received with respect to a particular share of distributing common_stock provided the terms of the designation are consistent with the terms of the external distributions sec_1_358-2 the holding_period of the controlled common_stock received by a distributing stockholder in the distribution will include the holding_period of the distributing common_stock with respect to which the distribution will be made provided the distributing common_stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits will be allocated among distributing controlled and other controlled in accordance with sec_312 and sec_1 a and e the receipt by distributing stockholders of cash in lieu of fractional shares of controlled common_stock will be treated for federal_income_tax purposes as if the fractional shares had been distributed to the distributing stockholders as part of the distribution and then had been disposed of by such stockholders for the amount of such cash in a sale_or_exchange the gain_or_loss if any determined using the basis allocated to the fractional shares in ruling and the holding_period attributed to the fractional shares in ruling will be treated as a capital_gain or loss provided the stock was held as a capital_asset by the selling stockholder sec_1001 following the distribution controlled will not be a successor of distributing for purposes of sec_1504 therefore controlled and its direct and plr-112866-11 indirect subsidiaries that are includable corporations under sec_1504 and satisfy the ownership requirements of sec_1504 will be members of an affiliated_group_of_corporations entitled to file a consolidated federal_income_tax return with controlled as the common parent except for purposes of sec_355 payments made between distributing controlled or other controlled as a result of post-closing cash adjustments the general indemnification agreements or the tax indemnification provisions that i have arisen or will arise for a taxable_period ending on or before the distribution or for a taxable_period beginning before and ending after the distribution and ii will not become fixed and ascertainable until after the distribution will be treated as occurring during the taxable_period s beginning before the distribution in which they arose cf 344_us_6 tax character of later transaction will derive from earlier related transaction revrul_83_73 c b caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular this office has not reviewed any information pertaining to and has made no determination regarding i whether any distribution will satisfy the business_purpose requirement of sec_1_355-2 ii whether any distribution will be used principally as a device for the distribution of earnings_and_profits of the distributing_corporation or the controlled_corporation or both iii whether any distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 iv the federal_income_tax treatment of any payment made under the trademark ip agreements or the transition services agreements that is not for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length v the federal_income_tax treatment of a steps in the distributing foreign restructuring that precede step iii of the proposed transactions and b any other restructuring activity not specifically described in the proposed transactions vi whether the reverse_stock_split will qualify as a reorganization under sec_368 plr-112866-11 vii the adjustments to earnings_and_profits or deficits in earnings_and_profits if any in any of the transactions to which sec_367 applies to the extent not otherwise specifically ruled upon above and viii to the extent not otherwise specifically ruled upon above any other consequences under sec_367 with respect to any transaction described in this letter_ruling procedural statements this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent 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_2011_1 2011_1_irb_1 however when the criteria in section dollar_figure of revproc_2011_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances a copy of this letter must be attached to any income_tax return to which it is relevant alternatively any taxpayer filing its return electronically may satisfy this requirement by attaching a statement to the return that provides the date and control number of this letter in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to each of your authorized representatives sincerely gerald b fleming senior technician reviewer branch corporate