Related-entity transfers may be treated as a direct transfer

Plain-English summary

A foreign subsidiary loaned funds to a second foreign corporation, which distributed the funds to its U.S. parent. That U.S. corporation then distributed the same funds to the common U.S. parent of the group. Chief Counsel advised that, based on the facts, substance-over-form principles could treat the series as a direct transfer from the first foreign subsidiary to the common parent. The memorandum offered no other recommendations or arguments.

Ruling snapshot

• Question: Should a series of fund transfers among related corporations be respected in its stated form?
• Outcome: Advice given
• Key authorities: Substance-over-form principles; IRC § 301

Full text (IRS public release)

       Office of Chief Counsel
       Internal Revenue Service
       Memorandum
       Number: 201552027
       Release Date: 12/24/2015
       CC:CORP:B06: GRJohnson                    Third Party Communication: None
       POSTU-102445-15                           Date of Communication: Not Applicable

UILC: 301.01-07

date: August 19, 2015

 to:   Associate Area Counsel (Miami)
       (Large Business & International)
       Attn: Timothy L. Smith

from: George R. Johnson
General Attorney, Branch 6
(Corporate)

subject: Treatment of Series of Transfers

       This Chief Counsel Advice responds to your request for assistance dated June 16,
       2015. This advice may not be used or cited as precedent.

       This is in response to your request for advice regarding whether a series of transfers of
       funds by multiple, related entities should be respected for Federal income tax purposes.
       This advice may not be used or cited as precedent.

       In one series of transfers (in form): (i) a foreign corporation (FC1) wholly-owned by a
       U.S. corporation (Parent) loaned funds to another foreign corporation (FC2), which in
       turn was wholly-owned by a U.S. subsidiary of Parent (USSub); (ii) FC2 distributed
       those funds to USSub; and (iii) USSub distributed those funds to Parent (no reference is
       made to any disregarded entities). Based on the facts, the series of transfers may be
       treated as a transfer of the funds by FC1 to Parent based on substance-over-form
       principles.

       We do not have any other recommendations or arguments at this time.

       This writing may contain privileged information. Any unauthorized disclosure of this
       writing may undermine our ability to protect the privileged information. If disclosure is
       determined to be necessary, please contact this office for our views.

POSTU-102445-15 2

Please call ----------------------- at --------------------- if you have any further questions.

                                         _____________________________
                                         Thomas I. Russell
                                         Branch Chief, Branch 6
                                         (Corporate)