Private Letter Ruling
202026001
Released June 26, 2020
Approved
IRS approves tax-free treatment for a multinational group's separation of three businesses
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This page covers one taxpayer's ruling from 2020, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)
Plain-English summary
A publicly traded parent proposed an 81-step restructuring to separate three worldwide businesses through internal asset transfers, entity elections, mergers, split-offs, and two public spin-offs before a separate merger and parent-company name change. The IRS issued 108 rulings that generally treated the specified internal and external distributions as tax-free under section 355 and several contribution-distribution pairs as Type D reorganizations under section 368(a)(1)(D). The rulings also addressed corporate and shareholder nonrecognition, carryover basis and holding periods, earnings-and-profits allocations, debt-for-debt exchanges, use of spin-off debt proceeds, and cash paid instead of fractional shares. Separate rulings described how overlapping shareholder acquisitions and open-market repurchases would be measured under section 355(e), and allowed several check-the-box liquidations to retain section 332 treatment despite related asset reincorporations. The IRS expressly did not determine whether the distributions satisfied the business-purpose and nondevice requirements or whether they were part of a plan involving a 50-percent acquisition, and it gave no opinion on issues outside the 108 stated rulings.
Ruling snapshot
- Question: Would the specified internal separations, public spin-offs, debt transactions, ownership changes, and deemed liquidations receive the requested nonrecognition and related tax treatment?
- Outcome: approved (108 requested rulings were favorable, subject to extensive representations and caveats)
- Key authorities: IRC §§ 332, 355, 357, 358, 361, 362, 368, 1001, 1032, 1223; Treas. Reg. §§ 1.355-7, 1.355-8T; Rev. Proc. 2017-52; Rev. Proc. 2018-53
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202026001 Third Party Communication: None
Release Date: 6/26/2020 Date of Communication: Not Applicable
Index Number: 355.00-00, 355.01-01,
355.10-00, 361.00-00, Person To Contact:
368.04-00 --------------------------, ID No. ----------------
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------------------- Refer Reply To:
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---------------------------------- PLR-117976-19
Date:
December 13, 2019
Legend
Distributing Parent = --------------------------------------------
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Target A = ----------------------------
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Business A = ---------------------------
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Dear ----------------:
This letter responds to your letter dated July 31, 2019, requesting rulings on certain
federal income tax consequences of a series of proposed transactions (the “Proposed
Transaction,” as defined below). The information provided in that letter and in
subsequent correspondence is summarized below.
PLR-117976-19 11
This letter is issued pursuant to Rev. Proc. 2017-52, 2017-41 I.R.B. 283, as amplified
and modified by Rev. Proc. 2018-53, 2018-43 I.R.B. 667, regarding one or more
“Covered Transactions” under section 355 and/or section 368 of the Internal Revenue
Code (the “Code”) and pursuant to section 6.03(2) of Rev. Proc. 2019-1, 2019-1 I.R.B.
1, regarding one or more significant issues under section 355 of the Code. This office
expresses no opinion as to any issue not specifically addressed by the rulings below.
The rulings contained in this letter are based on facts and representations submitted by
the taxpayer and accompanied by a penalties of perjury statement executed by an
appropriate party. This office has not verified any of the materials submitted in support
of the request for rulings. Verification of the information, representations, and other data
may be required as part of the audit process.
This office has made no determination regarding whether the distributions in the
Proposed Transaction: (i) satisfy the business purpose requirement of Treas. Reg. §
1.355-2(b); (ii) are used primarily as devices for the distribution of the earnings and
profits of the distributing corporations or the controlled corporations or both (see section
355(a)(1)(B) and Treas. Reg. § 1.355-2(d)); or (iii) are part of a plan (or series of related
transactions) pursuant to which one or more persons will acquire directly or indirectly
stock representing a 50-percent or greater interest in the distributing corporations or the
controlled corporations, or any predecessor or successor of the distributing corporations
or the controlled corporations, within the meaning of Treas. Reg. § 1.355-8T (see
section 355(e)(2)(A)(ii) and Treas. Reg. § 1.355-7).
Summary of Facts
Distributing Parent, a publicly traded State A corporation, is the parent company of a
worldwide group of foreign and domestic affiliates (the “Distributing Worldwide Group”).
Distributing Parent is the common parent of a consolidated group (within the meaning of
Treas. Reg. § 1.1502-1(h)).
The Distributing Worldwide Group is engaged in Business A, Business B, and Business
C. Distributing Parent has submitted financial information indicating that Business A,
Business B, and Business C have had gross receipts and operating expenses
representing the active conduct of a trade or business for each of the past five years.
The following describes the relevant corporate structure of the Distributing Worldwide
Group immediately prior to the Proposed Transaction (described below).
Distributing Parent directly and indirectly owns all of the stock of Distributing 1, a State
A corporation. Distributing 1, in turn, directly and indirectly owns all of the stock of FSub
9, a Country B entity that is treated as a corporation for U.S. federal income tax
purposes.
PLR-117976-19 12
FSub 9 directly owns (i) a percent of the stock of FSub 10, a Country B entity that is
treated as a corporation for U.S. federal income tax purposes; and (ii) all of the interests
in FSub 8, a Country B entity that is treated as a disregarded entity for U.S. federal
income tax purposes.
FSub 10 directly or indirectly owns all of the stock of or interests in (i) FSub 13, a
Country G entity that is treated as a disregarded entity for U.S. federal income tax
purposes; (ii) FSub 11, a Country B entity that is treated as a corporation for U.S.
federal income tax purposes; and (iii) FSub 24, a Country G entity that is treated as a
disregarded entity for U.S. federal income tax purposes.
FSub 8 directly owns all of the stock of FSub 5, a Country B entity that is treated as a
corporation for U.S. federal income tax purposes.
FSub 24 directly owns all of the stock of FSub 12, a Country G entity that is treated as a
corporation for U.S. federal income tax purposes.
FSub 5 directly and indirectly owns the remaining b percent of FSub 10. FSub 5 also
directly owns all of the stock of or interests in (i) FSub 4, a Country D entity that is
treated as a disregarded entity for U.S. federal income tax purposes; and (ii) Controlled
1, a Country B entity that is treated as a corporation for U.S. federal income tax
purposes.
FSub 4 directly owns all of the interests in FSub 3, a Country D entity that is treated as
a disregarded entity for U.S. federal income tax purposes. FSub 3, in turn, directly owns
all of the stock of FSub 2, a Country D entity that is treated as a corporation for U.S.
federal income tax purposes. FSub 2, in turn, directly owns (i) all of the stock of FSub 1,
a Country A entity that is treated as a corporation for U.S. federal income tax purposes;
and (ii) c percent of the stock of FSub 7, a Country C entity that is treated as a
corporation for U.S. federal income tax purposes. Distributing Parent directly owns the
remaining d percent of the stock of FSub 7.
FSub 7 directly owns all of the stock of FSub 6, a Country C entity that is treated as a
corporation for U.S. federal income tax purposes.
Distributing Parent indirectly owns all of the stock of Sub 4, a State A corporation.
Distributing Parent directly owns all of the stock of or interests in (i) LLC 3, a State A
limited liability company that is treated as a disregarded entity for U.S. federal income
tax purposes; (ii) Distributing 4, a State B corporation; (iii) Distributing 3, a State A
corporation; (iv) Sub 6, a State A corporation; (v) FSub 25, a Country E entity that is
treated as a corporation for U.S. federal income tax purposes; (vi) LLC 4, a State A
limited liability company that is treated as a disregarded entity for U.S. federal income
tax purposes; (vii) FSub 26, a Country H entity that is treated as a corporation for U.S.
federal income tax purposes; (viii) FSub 27, a Country E entity that is treated as a
corporation for U.S. federal income tax purposes; and (ix) Sub 2, a State A corporation.
PLR-117976-19 13
Distributing Parent also directly owns (i) e percent of the stock of Distributing 2, a State
A corporation; and (ii) f percent of the stock of Sub 7, a State A corporation.
LLC 3 directly owns all of the interests in FSub 20, a Country E entity that is treated as a
disregarded entity for U.S. federal income tax purposes. FSub 20, in turn, directly owns
all of the stock of Distributing 5, a Country E entity that is treated as a corporation for
U.S. federal income tax purposes. Distributing 5, in turn, directly owns all of the interests
in FSub 17, a Country F entity that is treated as a disregarded entity for U.S. federal
income tax purposes.
FSub 17 directly owns all of the interests in (i) FSub 18, a Country F entity that is
treated as a corporation for U.S. federal income tax purposes; (ii) FSub 21, a Country F
entity that is treated as a corporation for U.S. federal income tax purposes; and (iii)
FSub 16, a Country F entity that is treated as disregarded entity for U.S. federal income
tax purposes. FSub 16 directly owns h percent of FSub 15, a Country I entity that is
treated as a corporation for U.S. federal income tax purposes. FSub 17 owns i percent
of the stock of FSub 15, and Distributing 4 owns the remaining j percent of the stock of
FSub 15.
Distributing 3 directly owns (i) all of the stock of Sub 3, a State A corporation; and (ii) the
remaining k percent of the stock of Sub 7. Sub 3 directly owns (i) all of the stock of
Controlled 6, a Country J entity that is treated as a corporation for U.S. federal income
tax purposes; and (ii) l percent of the stock of Controlled 7, a Country K entity that is
treated as a corporation for U.S. federal income tax purposes. A group of unrelated third
parties owns the remaining m percent of the stock of Controlled 7.
Sub 2 directly owns the remaining n percent of the stock of Distributing 2 (representing
all of Distributing 2’s nonvoting common stock).
Distributing Parent also directly and indirectly owns all of the stock of Distributing 1 and
Sub 1, each a State A corporation.
Distributing 1 has common stock and several classes of voting preferred stock—Series
A, Series B, Series C, Series D, Series E, and Series F. The common stock of
Distributing 1 is directly owned by the following entities: (i) Distributing Parent owns o
percent; (ii) Distributing 4 owns p percent; and (iii) Distributing 3 owns the remaining q
percent. Distributing 4 directly owns all of the Series A preferred shares in Distributing 1.
Sub 1 directly owns all of the Series B preferred shares in Distributing 1. The Series C
preferred shares in Distributing 1 are directly owned by the following entities: (i)
Distributing Parent owns r percent; (ii) Distributing 4 owns p percent; and (ii) Distributing
3 owns the remaining s percent. Sub 4 directly owns all of the Series D preferred shares
in Distributing 1. Distributing 2 directly owns all of the Series E preferred shares in
Distributing 1. The Series F preferred shares in Distributing 1 are directly owned by the
PLR-117976-19 14
following entities: (i) Distributing 4 owns t percent; and (ii) Distributing 3 owns the
remaining u percent.
Sub 1 has voting common stock, nonvoting common stock, and nonvoting preferred
stock. The voting common stock of Sub 1 is directly owned by the following entities: (i)
Distributing Parent owns v percent; (ii) Sub 2 owns w percent; and (iii) Sub 3 owns the
remaining x percent. Distributing 2 directly owns all of the nonvoting common stock of
Sub 1. The nonvoting preferred stock of Sub 1 is directly owned by the following
entities: (i) Distributing Parent owns y percent; (ii) Distributing 4 owns z percent; (iii)
Distributing 2 owns aa percent; and (iv) Sub 3 owns the remaining bb percent.
Immediately after Step xxi, and as of the date of Steps xxx through xxxix, Distributing 1
directly owns all of the stock of (i) Controlled 1, a Country B entity that is treated as a
corporation for U.S. federal income tax purposes; (ii) Controlled 4, a Country L entity
that is treated as a corporation for U.S. federal income tax purposes; (iii) Controlled 3, a
Country B entity that is treated as a corporation for U.S federal income tax purposes;
(iv) FSub 14, a Country M entity that is treated as a corporation for U.S. federal income
tax purposes; (v) Sub 5, a State A corporation; and (vi) NewCo 7, a Country B entity
that is treated as a corporation for U.S. federal income tax purposes. Distributing 1 also
directly owns c percent of the stock Controlled 5, a Country N entity that is treated as a
corporation for U.S. federal income tax purposes. Distributing Parent directly owns (i)
the remaining d percent of the stock of Controlled 5; and (ii) g percent of the stock of
NewCo4, a newly formed Country C entity that is treated as a corporation for U.S.
federal income tax purposes. Distributing 1 also indirectly owns all of the stock of
NewCo 2, a Country B entity that is treated as a disregarded entity for U.S. federal
income tax purposes. NewCo 2 owns the remaining c percent of NewCo 4.
The Distributing Merger
On Date 1, Distributing Parent formed Merger Sub, a State A corporation. On Date 2,
Distributing Parent, Merger Sub, and Target B, a publicly traded State A corporation,
entered into an agreement and plan of merger.
Share Repurchases
Distributing Parent has historically had a share repurchase program pursuant to which it
has repurchased shares of its common stock in order to achieve an appropriate capital
structure. Although Distributing Parent generally suspended its share repurchase
program on Date 3, it continued (and expects to continue) to repurchase shares relating
to Distributing Parent’s equity award programs and employee savings plans.
Additionally, each of External Controlled 1 and External Controlled 2 (both defined
below) may similarly commence purchasing its respective shares after the External
Controlled 1 Distribution and External Controlled 2 Distribution (both defined below),
respectively.
PLR-117976-19 15
All share repurchases, other than shares purchased from the Distributing Savings Plan
(defined below), occurring within the period beginning two years prior to the date of the
earliest, and ending two years after the date of the latest distribution that is expected to
occur in connection with the Proposed Transaction (such period, the “Section 355(e)
Testing Period” and such repurchases, collectively, the “Share Repurchases”), are
expected to be made through open market purchases, Rule 10b5-1 plans, purchases in
compliance with Rule 10b-18, accelerated share repurchase (“ASR”) transactions, one
or more tender offers open to all holders of Distributing Parent (or New Parent), External
Controlled 1, or External Controlled 2 stock, as applicable, or a combination thereof.
Under the terms of the Distributing Savings Plan, participants may elect to diversify their
interest and cause the Distributing Savings Plan to dispose of Distributing Parent stock
to facilitate such diversification. In such cases, Distributing Parent may, but is not
obligated to, repurchase its shares held by the Distributing Savings Plan.
Distributing Parent Worldwide Group Debt
The Distributing Parent Worldwide Group has several outstanding tranches of publicly-
held debt, including Distributing Parent Debt A. The Distributing Parent Worldwide
Group also funds its short term liquidity needs through issuance of commercial paper
(the “Distributing Parent Worldwide Group Commercial Paper” together with Distributing
Parent Debt A, the “Distributing Parent Worldwide Group Debt”).
Continuing Arrangements
In connection with the Proposed Transaction, Distributing Parent, External Controlled 1,
External Controlled 2, and their respective affiliates will enter into customary
agreements to effect an orderly transition of External Controlled 1 and External
Controlled 2 to standalone public companies (the “Transaction Agreements”).
The Transaction Agreements will include customary agreements, including a separation
and distribution agreement, a tax matters agreement, an employee matters agreement,
an intellectual property matters agreement, and one or more transition services
agreements. Any transition services agreements will be on a cost or cost-plus basis.
The Proposed Transaction
For what are represented to be valid business reasons, Distributing Parent proposes to
undertake the following Proposed Transaction to separate Business A, Business B, and
Business C. The steps of the Proposed Transaction may occur in a different order than
described below, and some of the steps of the Proposed Transaction have already been
completed.
(i) FSub 1 will file a check-the-box election (“CTB Election”) to be treated as a
disregarded entity for U.S. federal income tax purposes.
PLR-117976-19 16
(ii) FSub 1 will distribute or sell all of its assets related to Business A, and all of its
assets related to Business B, to FSub 2.
(iii) FSub 2 will file a CTB Election to be treated as a disregarded entity for U.S.
federal income tax purposes and contribute (i) all of its assets related to Business
A (including assets received from FSub 1 in Step (ii)) to NewCo 1, a newly
formed Country B entity that will be treated as a disregarded entity for U.S.
federal income tax purposes; and (ii) all of its assets related to Business B
(including assets received from FSub 1 in Step (ii)) to NewCo 2, a newly formed
Country B entity that will be treated as a disregarded entity for U.S. federal
income tax purposes.
(iv) FSub 2 will distribute all of the interests in each of NewCo 1 and NewCo 2 to
FSub 3.
(v) FSub 3 will transfer all of the interests in each of NewCo 1 and NewCo 2 to FSub
5 through a series of transfers that are disregarded for U.S. federal income tax
purposes.
(vi) FSub 6 will file a CTB Election to be treated as a disregarded entity for U.S.
federal income tax purposes (the “Country C CTB Election”).
(vii) FSub 7 will form NewCo 3, a Country C entity that will be treated as a
disregarded entity for U.S. federal income tax purposes. FSub 6 will transfer all of
its assets related to Business B to NewCo 3.
(viii) FSub 7 will contribute (i) all of the interests in NewCo 3 to NewCo 4, a newly
formed Country C entity that will be treated as a corporation for U.S. federal
income tax purposes (the “NewCo 4 Contribution”); and (ii) all of the interests in
FSub 6 to NewCo 5, a newly formed Country C entity that will be treated as a
corporation for U.S. federal income tax purposes (the “NewCo 5 Contribution”).
(ix) FSub 7 will distribute all of the stock of each of NewCo 4 and NewCo 5 to FSub 2
and Distributing Parent.
(x) FSub 5 will file a CTB Election to be treated as a disregarded entity for U.S.
federal income tax purposes (the “Country B CTB Election”).
(xi) FSub 5 will contribute certain property related to Business A to NewCo 1.
(xii) FSub 5 will contribute certain property related to Business B to NewCo 2.
PLR-117976-19 17
(xiii) FSub 4 will contribute assets related to Business A to NewCo 6, a newly formed
Country D entity that will be treated as disregarded entity for U.S. federal income
tax purposes. FSub 4 will distribute all of the interests in NewCo 6 to FSub 5.
(xiv) FSub 5 will distribute all of the stock of or interests in each of NewCo 1, NewCo
2, NewCo 6, and Controlled 1 to FSub 8, which will distribute the stock of or
interests in each of NewCo 2, NewCo 6, Controlled 1, and FSub 5 to FSub 9.
(xv) FSub 10 will contribute cash to FSub 11 (the “FSub 11 Contribution”).
(xvi) FSub 10 (through FSub 24, a wholly owned disregarded entity) will contribute
certain assets related to Business B to FSub 12 (the “FSub 12 Contribution” and
together with the FSub 11 Contribution, the “FSub 10 Contributions”).
(xvii) FSub 10 will file a CTB Election to be treated as a disregarded entity for U.S.
federal income tax purposes (the “FSub 10 CTB Election”).
(xviii) FSub 10 will contribute all of the interests in FSub 13 to NewCo 7, a newly
formed Country B entity that will be treated as a corporation for U.S. federal
income tax purposes.
(xix) FSub 10 will distribute all of the stock of each of NewCo 7 and FSub 12, as well
as all of its assets related to Business B, and all of its assets related to Business
C, to FSub 9.
(xx) FSub 9 will contribute (i) assets related to Business A (including all of the stock of
NewCo 6) to NewCo 7 (together with Step (xviii), the “NewCo 7 Contribution”); (ii)
assets related Business B (including all of the stock of or interests in each of
NewCo 2 and FSub 12) to Controlled 1 (the “Controlled 1 Contribution”); and (iii)
assets related to Business C (including all of the interests in FSub 5 and assets
deemed received from FSub 10 in the FSub 10 CTB Election) to Controlled 3, a
newly formed Country B entity that will be treated as a corporation for U.S federal
income tax purposes (the “First Controlled 3 Contribution”).
(xxi) FSub 9 will distribute all of the stock of each of Controlled 1, Controlled 3, and
NewCo 7 to Distributing 1.
(xxii) Distributing Parent will contribute its interest in Sub 1 (consisting of v percent of
the voting common stock of Sub 1 and y percent of the nonvoting preferred stock
of Sub 1) to Distributing 2 in exchange for Distributing 2 stock.
(xxiii) Sub 2 will contribute its interest in Sub 1 (consisting of w percent of the voting
common stock of Sub 1) to Distributing 2 in exchange for Distributing 2 stock.
PLR-117976-19 18
(xxiv) Distributing Parent will contribute its interest in Distributing 2 (consisting of all of
the voting common stock of Distributing 2) to Sub 2 in exchange for no
consideration.
(xxv) Sub 2 will exchange its Distributing 2 nonvoting common stock for Distributing 2
voting common stock.
(xxvi) Sub 3 will merge into Distributing 2 with Distributing 2 surviving (the “Sub 3
Merger”). Distributing 3 (Sub 3’s shareholder) will receive Distributing 2 high-vote
preferred shares (the “Distributing 2 Voting Preferred Stock”) as consideration in
the Sub 3 Merger.
(xxvii) Distributing 2 will form NewCo 8, a newly formed U.S. limited liability company
that will be treated as a disregarded entity for U.S. federal income tax purposes.
(xxviii) Sub 1 will distribute $cc of its receivables to Distributing Parent, Sub 3,
Distributing 2, and Distributing 4 in satisfaction of accrued and unpaid dividends.
(xxix) Sub 1 will merge into NewCo 8 with NewCo 8 surviving (the “Sub 1 Merger”).
Distributing 4 will receive Distributing 2 nonvoting preferred shares (the
“Distributing 2 Nonvoting Preferred Stock”) as consideration in the Sub 1 Merger.
(xxx) Distributing 1 will distribute $dd of its receivables to Distributing Parent, Sub 1,
Sub 4, Distributing 4, Distributing 3, and Distributing 2 in satisfaction of accrued
and unpaid dividends.
(xxxi) Distributing 1 will distribute a portion of its interest (ee percent) in the stock of
Controlled 1 (equal to the value of Distributing 3’s interest in Distributing 1) to
Distributing 3 in exchange for all of Distributing 3’s interest in Distributing 1
(consisting of q percent of the common stock of Distributing 1, s percent of the
Series C preferred shares of Distributing 1, and u percent of the Series F
preferred stock of Distributing 1).
(xxxii) Distributing 1 will distribute its remaining interest (ff percent) in the stock of
Controlled 1 to Distributing Parent in exchange for a portion of Distributing
Parent’s interest in the common stock of Distributing 1 (equal to the value of the
Controlled 1 stock that will be distributed to Distributing Parent) (together with
Step (xxxi), the “Controlled 1 Distribution”).
(xxxiii) Sub 5 will distribute $gg of its cash or receivables to Distributing 1.
(xxxiv) Distributing 1 will contribute $hh of its cash or receivables, and all of the stock of
NewCo 7 to Controlled 2, a newly formed State A limited liability company that
will be treated as a corporation for U.S. federal income tax purposes (the
“Controlled 2 Contribution”).
PLR-117976-19 19
(xxxv) Distributing 1 will distribute all of the stock of Controlled 2 to Distributing 4 in
exchange for a portion of Distributing 4’s interest in Distributing 1 (equal to the
value of all of the stock of Controlled 2) (together with the Controlled 2
Contribution, the “Controlled 2 Distribution”).
(xxxvi) Distributing 1 will contribute all of the stock of FSub 14 and ii percent of the stock
of Controlled 5 to Controlled 3 in exchange for Controlled 3 stock (the “Second
Controlled 3 Contribution”).
(xxxvii) Distributing 1 will distribute all of the stock of Controlled 3 to Distributing 4
in exchange for Distributing 4’s remaining interest in Distributing 1 (together with
the Second Controlled 3 Contribution, the “Controlled 3 Distribution”).
(xxxviii) Distributing 1 will distribute all of the stock of Controlled 4 to NewCo 8 (a
disregarded entity of Distributing 2) in exchange for a portion of NewCo 8’s
Series B preferred shares in Distributing 1 (equal to the value of the Controlled 4
stock distributed to NewCo 8). NewCo 8 will distribute all of the stock of
Controlled 4 to Distributing 2 (the “First Controlled 4 Distribution”).
(xxxix) Distributing 1 will distribute its remaining jj percent interest in the stock of
Controlled 5 to NewCo 8 (a disregarded entity) in exchange for a portion of
NewCo 8’s Series B preferred shares in Distributing 1 (equal to the value of
Distributing 1’s jj percent interest in the stock of Controlled 5). NewCo 8 will
distribute its jj percent interest in the stock of Controlled 5 to Distributing 2 (the
“First Controlled 5 Distribution”).
(xl) Distributing 2 will distribute all of the stock of Controlled 4 to Distributing 4 in
exchange for a portion of Distributing 4’s Distributing 2 Nonvoting Preferred
Stock (equal to the value of the stock of Controlled 4 distributed to Distributing 4)
(the “Second Controlled 4 Distribution”).
(xli) Distributing 2 will distribute its jj percent interest in the stock of Controlled 5 to
Distributing 4 in exchange for Distributing 4’s remaining Distributing 2 Nonvoting
Preferred Stock (the “Second Controlled 5 Distribution”).
(xlii) Distributing 3 will distribute all of the Distributing 2 Voting Preferred Stock to
Distributing Parent (the “Distributing 2 Distribution”).
(xliii) Distributing 2 will distribute all of the stock of Controlled 6 to Distributing Parent in
exchange for a portion of Distributing Parent’s Distributing 2 Voting Preferred
Stock (equal to the value of all of the stock of Controlled 6) (the “Controlled 6
Distribution”).
PLR-117976-19 20
(xliv) Distributing 2 will distribute its l percent interest in the stock of Controlled 7 to
Distributing Parent in exchange for a portion of Distributing Parent’s Distributing 2
Voting Preferred Stock (equal to the value of l percent of the stock of Controlled
7) (the “Controlled 7 Distribution”).
(xlv) Distributing 4 will distribute all of the stock of Controlled 2 to Distributing Parent.
(xlvi) Distributing 4 will form Controlled 8, a Country E entity that will be treated as a
corporation for U.S. federal income tax purposes. Distributing 4 will contribute
assets related to Business B (including (i) all of the stock of Controlled 4, and (ii)
kk percent of the stock of FSub15) to Controlled 8. Distributing 4 will then
distribute all of the stock of Controlled 8 to Distributing Parent (the “Controlled 8
Distribution”).
(xlvii) Distributing 4 will transfer ll percent of the stock of FSub 15 to FSub 16 in
exchange for cash (the “FSub 15 Acquisition”).
(xlviii) FSub 17 and FSub 18 will amalgamate under Country F law to form FSub 19, a
Country F entity that will be treated as a disregarded entity for U.S. federal
income tax purposes (the “Country F Amalgamation,” and together with the
Country B CTB Election, the Country C CTB Election, and the FSub 10 CTB
Election, the “Deemed Liquidations”).
(xlix) In exchange for all of FSub 19’s stock, FSub 19 will issue: (i) Class A common
shares equal to the value of its assets related to Business A; (ii) Class B
preferred shares equal to the value of its assets related to Business B; and (iii)
Class C preferred shares equal to the value of its assets related to Business C.
(l) Distributing 5 will form LLC 1, a State A limited liability company that will be
treated as a disregarded entity for U.S. federal income tax purposes.
(li) LLC 1 will form Controlled 9, a Country F entity that will be treated as a
corporation for U.S. federal income tax purposes.
(lii) Distributing 5 will transfer its Class B preferred shares of FSub 19 to Controlled 9
pursuant to the following three-party exchange: (i) Controlled 9 will issue shares
to LLC 1; (ii) LLC 1 will issue membership interests to Distributing 5; and (iii)
Distributing 5 will transfer the Class B preferred shares of FSub 19 directly to
Controlled 9.
(liii) FSub 19 will transfer assets related to Business B (including all of the interests in
FSub 16 and i percent of the stock of FSub15), and an amount of cash that is
required under Country F law to effectuate the transaction, to Controlled 9 in
exchange for preferred shares of Controlled 9.
PLR-117976-19 21
(liv) FSub 19 will redeem its Class B preferred shares transferred to Controlled 9 in
Step (lii) in exchange for a note (the “First Controlled 9 Note”) and Controlled 9
will redeem its preferred shares issued to FSub 19 in Step (liii) in exchange for a
note (the “Second Controlled 9 Note”).
(lv) The First Controlled 9 Note and the Second Controlled 9 Note will be set-off
against one another (together with Steps (l) – (liv), the “Business B
Contribution”).
(lvi) Distributing 5 will distribute all of the interests in LLC 1 to FSub 20, which will
distribute all of the interests in LLC 1 to LLC 3, which will distribute all of the
interests in LLC 1 to Distributing Parent (together with the Business B
Contribution, the “Business B Distribution”).
(lvii) Distributing 5 will form LLC 2, a State A limited liability company that will be
treated as a disregarded entity for U.S. federal income tax purposes.
(lviii) LLC 2 will form Controlled 10, a Country F entity that will be treated as a
corporation for U.S. federal income tax purposes.
(lix) Distributing 5 will transfer its Class C preferred shares of FSub 19 to Controlled
10 pursuant to the following three-party exchange: (i) Controlled 10 will issue
shares to LLC 2; (ii) LLC 2 will issue membership interests to Distributing 5; and
(iii) Distributing 5 will transfer the Class C preferred shares of FSub 19 directly to
Controlled 10.
(lx) FSub 19 will transfer assets related to Business C (including all of the stock of
FSub 21), and an amount of cash that is required under Country F law to
effectuate the transaction, to Controlled 10 in exchange for preferred shares of
Controlled 10.
(lxi) FSub 19 will redeem its Class C preferred shares transferred to Controlled 10 in
Step (lix) in exchange for a note (the “First Controlled 10 Note”) and Controlled
10 will redeem its preferred shares issued to FSub 19 in Step (lx) in exchange for
a note (the “Second Controlled 10 Note”).
(lxii) The First Controlled 10 Note and the Second Controlled 10 Note will be set-off
against one another (together with Steps (lvii) – (lxi), the “Business C
Contribution”).
(lxiii) Distributing 5 will distribute all of the interests in LLC 2 to FSub 20, which will
distribute all of the interests in LLC 2 to LLC 3, which will distribute all of the
interests in LLC 2 to Distributing Parent (together with the Business C
Contribution, the “Business C Distribution”).
PLR-117976-19 22
(lxiv) Distributing Parent will form External Controlled 1, a State A corporation, which
will issue the Business B Debt (the “Business B Debt Issuance”). External
Controlled 1 will distribute substantially all of the cash received in the Business B
Debt Issuance to Distributing Parent (the cash proceeds of the Business B Debt
Issuance to be distributed to Distributing Parent, the “External Controlled 1
Proceeds”). External Controlled 1 may issue the Business B Debt and distribute
the External Controlled 1 Proceeds prior to its receipt of a material portion of
assets related to Business B. As such, the Business B Debt may be guaranteed
by Distributing Parent, but any guarantees provided for the Business B Debt will
terminate no later than the completion of the External Controlled 1 Distribution
(defined below).
(lxv) No more than mm days after the External Controlled 1 Distribution (defined
below), Distributing Parent will transfer the External Controlled 1 Proceeds to one
or more holders of the Distributing Parent Worldwide Group Debt in satisfaction
of a portion of the Distributing Parent Worldwide Group Debt (the “First Debt
Cash Purge”).
(lxvi) Distributing Parent will transfer all of its assets related to Business B to External
Controlled 1, including (i) all of the stock of Distributing 3; (ii) f percent of the
stock of Sub 7; (iii) all of the stock of Sub 6; (iv) all of the stock of FSub 25; (v) all
of the interests in LLC 4; (vi) all of the stock of FSub 26; (vii) all of the stock in
Controlled 8; (viii) g percent of the stock of NewCo 4; (ix) ff percent of the stock
of Controlled 1; (x) all of the stock of Controlled 6; and (xi) l percent of the stock
of Controlled 7. In exchange, Distributing Parent will receive additional External
Controlled 1 stock, and newly issued debt securities in External Controlled 1 (the
“External Controlled 1 Securities”).
(lxvii) External Controlled 1 will form FSub 22, a Country E entity that will be treated as
a corporation for U.S. federal income tax purposes.
(lxviii) Distributing Parent will transfer all of the interests in LLC 1 to FSub 22 pursuant
to the following three-party exchange: (i) FSub 22 will issue shares to External
Controlled 1; (ii) External Controlled 1 will issue additional shares to Distributing
Parent; and (iii) Distributing Parent will transfer all of the interests in LLC 1
directly to FSub 22 (together with step lxvi, the “External Controlled 1
Contribution”).
(lxix) LLC 1 will liquidate under State A law.
(lxx) Distributing Parent will distribute all of the stock of External Controlled 1 pro rata
to Distributing Parent’s shareholders (the “Public Shareholders”) (together with
the External Controlled 1 Contribution, the “External Controlled 1 Distribution”).
PLR-117976-19 23
(lxxi) In connection with the External Controlled 1 Distribution, Distributing Parent will
transfer the External Controlled 1 Securities to one or more of the holders of the
Distributing Parent Worldwide Group Debt in satisfaction of a portion of the
Distributing Parent Worldwide Group Debt (the “First Debt-for-Debt Exchange”).
(lxxii) Distributing Parent will form External Controlled 2, a State A corporation, which
will issue the Business C Debt (the “Business C Debt Issuance”). External
Controlled 2 will distribute substantially all of the cash received in the Business C
Debt Issuance to Distributing Parent (the cash proceeds of the Business C Debt
Issuance to be distributed to Distributing Parent, the “External Controlled 2
Proceeds”). External Controlled 2 may issue the Business C Debt and distribute
the External Controlled 2 Proceeds prior to its receipt of a material portion of
assets related to Business C. As such, the Business C Debt may be guaranteed
by Distributing Parent, but any guarantees provided for the Business C Debt will
terminate no later than the completion of the External Controlled 2 Distribution
(defined below).
(lxxiii) No more than mm days after the External Controlled 2 Distribution (defined
below), Distributing Parent will transfer the External Controlled 2 Proceeds to
one or more of holders of the Distributing Parent Worldwide Group Debt in
satisfaction of a portion of the Distributing Parent Worldwide Group Debt (the
“Second Debt Cash Purge”).
(lxxiv) Distributing Parent will transfer all of its assets related to Business C to External
Controlled 2, including (i) d percent of the stock of each of Controlled 5 and FSub
7; (ii) all of the stock of FSub 27; and (iii) all of the stock of Distributing 4. In
exchange, Distributing Parent will receive additional External Controlled 2 stock,
and newly issued debt securities in External Controlled 2 (the “External
Controlled 2 Securities”).
(lxxv) External Controlled 2 will form FSub 23, a Country E entity that will be treated as
a corporation for U.S. federal income tax purposes.
(lxxvi) Distributing Parent will transfer all of the interests in LLC 2 to FSub 23 pursuant
to the following three-party exchange: (i) FSub 23 will issue shares to External
Controlled 2; (ii) External Controlled 2 will issue additional shares to Distributing
Parent; and (iii) Distributing Parent will transfer all of the interests in LLC 2
directly to FSub 23 (together with step lxxiv, the “External Controlled 2
Contribution”).
(lxxvii) LLC 2 will liquidate under State A law.
(lxxviii) Distributing Parent will distribute all of the stock of External Controlled 2
pro rata to the Public Shareholders (together with the External Controlled 2
Contribution, the “External Controlled 2 Distribution”) (the External Controlled 2
PLR-117976-19 24
Distribution, together with the External Controlled 1 Distribution, the “External
Distributions”).
(lxxix) In connection with the External Controlled 2 Distribution, Distributing Parent will
transfer the External Controlled 2 Securities to one or more of the holders of the
Distributing Parent Worldwide Group Debt in satisfaction of a portion of the
Distributing Parent Worldwide Group Debt (the “Second Debt-for-Debt
Exchange”).
(lxxx) Following the External Controlled 1 Distribution and the External Controlled 2
Distribution, Merger Sub will merge with and into Target B, with Target B
surviving as a wholly owned subsidiary of Distributing Parent (the “Distributing
Merger”).
(lxxxi) Immediately upon the effective time of the Distributing Merger, Distributing
Parent will change its name to New Parent.
Representations
Distributing Parent has made the following representations with respect to the Proposed
Transaction:
With respect to the Controlled 1 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(a) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(b) Distributing Parent has not made the following representations, which do not
apply to the Controlled 1 Distribution: Representations 6; 17; 18; 19; 20; 24; 25;
38; 39; 43.
(c) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
With respect to the Controlled 2 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(d) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(e) Distributing Parent has not made the following representations, which do not
apply to the Controlled 2 Distribution: Representations 6; 19; 20; 24; 25.
PLR-117976-19 25
With respect to the Controlled 3 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(f) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(g) Distributing Parent has not made the following representations, which do not
apply to the Controlled 3 Distribution: Representations 6; 19; 20; 24; 25; 38; 39;
43.
(h) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
With respect to the First Controlled 4 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(i) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 15(a); 22(a); 31(a); 41(a).
(j) Distributing Parent has not made the following representations, which do not
apply to the First Controlled 4 Distribution: Representations 6; 17; 18; 19; 20; 24;
25; 38; 39; 43.
(k) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(l) Distributing Parent has made the following modified representations:
Representation 11: Following the First Controlled 4 Distribution, Distributing 1 (or
the Distributing 1 SAG) and Controlled 4 (or the Controlled 4 SAG) each will
continue, independently and with its separate employees (or the employees of an
affiliate), the active conduct of the business on which it relies to meet the active
trade or business requirement of section 355(b).
With respect to the First Controlled 5 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(m) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
PLR-117976-19 26
(n) Distributing Parent has not made the following representations, which do not
apply to the First Controlled 5 Distribution: Representations 6; 17; 18; 19; 20; 24;
25; 38; 39; 43.
(o) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
With respect to the Second Controlled 4 Distribution, except as set forth below,
Distributing Parent has made all the representations in section 3 of the Appendix to
Rev. Proc. 2017-52.
(p) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 15(a); 22(a); 31(a); 41(a).
(q) Distributing Parent has not made the following representations, which do not
apply to the Second Controlled 4 Distribution: Representations 6; 17; 18; 19; 20;
24; 25; 38; 39; 43.
(r) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(s) Distributing Parent has made the following modified representations:
Representation 11: Following the Second Controlled 4 Distribution, Distributing 2
(or the Distributing 2 SAG) and Controlled 4 (or the Controlled 4 SAG) each will
continue, independently and with its separate employees (or the employees of an
affiliate), the active conduct of the business on which it relies to meet the active
trade or business requirement of section 355(b).
With respect to the Second Controlled 5 Distribution, except as set forth below,
Distributing Parent has made all the representations in section 3 of the Appendix to
Rev. Proc. 2017-52.
(t) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(u) Distributing Parent has not made the following representations, which do not
apply to the Second Controlled 5 Distribution: Representations 6; 17; 18; 19; 20;
24; 25; 38; 39; 43.
(v) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
PLR-117976-19 27
With respect to the Distributing 2 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(w) Distributing Parent has made the following alternative representations:
Representations 3(b); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(x) Distributing Parent has not made the following representations, which do not
apply to the Distributing 2 Distribution: Representations 7; 17; 18; 19; 20; 24; 25;
39.
(y) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(z) Distributing Parent has made the following modified representations:
Representation 46: Distributing 2 will not issue stock or securities to a person
other than Distributing 3, Distributing Parent, Sub 2, and Distributing 4 in
anticipation of the Distributing 2 Distribution.
With respect to the Controlled 6 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(aa) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(bb) Distributing Parent has not made the following representations, which do not
apply to the Controlled 6 Distribution: Representations 6; 17; 18; 19; 20; 24; 25;
38; 39; 43.
With respect to the Controlled 7 Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(cc) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(dd) Distributing Parent has not made the following representations, which do not
apply to the Controlled 7 Distribution: Representations 6; 17; 18; 19; 20; 24; 25;
38; 39; 43.
With respect to the Business B Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
PLR-117976-19 28
(ee) Distributing Parent has made the following alternative representations:
Representations 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(ff) Distributing Parent has not made the following representations, which do not
apply to the Business B Distribution: Representations 7; 19; 20; 24; 25; 38; 39.
(gg) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(hh) Distributing Parent has made the following modified representations:
Representation 3: Distributing 5 will not engage in a transaction, in anticipation of
the Business B Distribution, in which either (i) Distributing 5 obtains control of
Controlled 9 (including a recapitalization into control but excluding a transaction
that includes the formation of Controlled 9), or (ii) a corporation of which
Distributing 5 is not in control becomes a member of the Controlled 9 SAG,
except for acquisitions by Distributing 5 from another member of an affiliated
group of which Distributing 5 is a member (as contemplated by Treas. Reg. §
1.355-3(b)(4)(iii)).
Representation 43: For purposes of Treas. Reg. § 1.367(b)-5(c), Distributing
Parent’s predistribution amount with respect to Distributing 5 or Controlled 9 will
not exceed Distributing Parent’s postdistribution amount with respect to both
entities, or, if the predistribution amount does exceed the postdistribution
amount, Distributing Parent will reduce its basis, or include an amount in income
as a deemed dividend, to the extent provided in Treas. Reg. § 1.367(b)-5(c)(2).
With respect to the Business C Distribution, except as set forth below, Distributing
Parent has made all the representations in section 3 of the Appendix to Rev. Proc.
2017-52.
(ii) Distributing Parent has made the following alternative representations:
Representations 3(a); 8(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(jj) Distributing Parent has not made the following representations, which do not
apply to the Business C Distribution: Representations 7; 19; 20; 24; 25; 38; 39.
(kk) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(ll) Distributing Parent has made the following modified representations:
Representation 43: For purposes of Treas. Reg. § 1.367(b)-5(c), Distributing
Parent’s predistribution amount with respect to Distributing 5 or Controlled 10 will
PLR-117976-19 29
not exceed Distributing Parent’s postdistribution amount with respect to both
entities, or, if the predistribution amount does exceed the postdistribution
amount, Distributing Parent will reduce its basis, or include an amount in income
as a deemed dividend, to the extent provided in Treas. Reg. § 1.367(b)-5(c)(2).
With respect to the External Controlled 1 Distribution, except as set forth below,
Distributing Parent has made all the representations in section 3 of the Appendix to
Rev. Proc. 2017-52.
(mm) Distributing Parent has made the following alternative representations:
Representations 3(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(nn) Distributing Parent has not made the following representations, which do not
apply to the External Controlled 1 Distribution: Representations 7; 24; 25; 35.
(oo) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(pp) Distributing Parent has made the following modified representations:
Representation 2: In the External Controlled 1 Distribution, Distributing Parent
will distribute, pursuant to the same plan, all of the stock and securities of
External Controlled 1 that it holds immediately before the External Controlled 1
Distribution.
Representation 5: None of the External Controlled 1 stock, External Controlled 1
Securities, External Controlled 1 Proceeds, or other property to be distributed in
the External Controlled 1 Distribution will be received in any capacity other than
that of a shareholder or creditor of Distributing Parent.
Representation 8: To the extent Distributing Parent transfers External Controlled
1 Securities and External Controlled 1 Proceeds to one or more holders of
Distributing Parent Worldwide Group Debt in exchange for Distributing Parent
Worldwide Group Debt, Distributing Parent will distribute such securities and
proceeds pursuant to an overall plan of reorganization.
Representation 17: Other than Business B Debt, any liabilities assumed (within
the meaning of section 357(d)) by External Controlled 1 were incurred in the
ordinary course of business and are associated with the assets transferred.
Representation 32: Other than amounts payable between Distributing Parent and
External Controlled 1 arising from the Transaction Agreements, no intercorporate
debt will exist between Distributing Parent and External Controlled 1 at the time
of, or subsequent to, the External Controlled 1 Distribution.
PLR-117976-19 30
Representation 33: Payments made in connection with all continuing
transactions, if any, between Distributing Parent and External Controlled 1 after
the External Controlled 1 Distribution will be for fair market value based on arm’s-
length terms, except for certain transition services agreements, which will be on a
cost or cost-plus basis.
Representation 35: The payment of cash in lieu of fractional shares of External
Controlled 1 is solely for the purpose of avoiding the expense and inconvenience
of issuing fractional shares and does not represent separately bargained-for
consideration. The fractional share interests of each Distributing Parent
shareholder will be aggregated, and no Distributing Parent shareholder of record
will receive cash in an amount equal to or greater than the value of one full share
of External Controlled 1 (with the possible exception of shareholders who hold
Distributing Parent stock in multiple accounts or with multiple brokers).
In addition, with respect to the External Controlled 1 Distribution, except as set forth
below, Distributing Parent has made all the representations set forth in section 3.04 of
Rev. Proc. 2018-53.
(qq) Distributing Parent has made the following modified representation:
Representation 4: Distributing Parent incurred the Distributing Parent Worldwide
Group Debt that will be assumed or satisfied (i)(A) before the date hereof and (B)
no later than 60 days before the earliest of the following dates (x) the date of the
first public announcement (as defined in Treas. Reg. § 1.355-7(h)(10)) of the
External Controlled 1 Distribution or a similar transaction, (y) the date of the entry
by Distributing Parent into a binding agreement to engage in the External
Controlled 1 Distribution or a similar transaction and (z) the date of approval of
the External Controlled 1 Distribution or a similar transaction by the Distributing
Parent board of directors, or (ii) on a date later than any such date described in
clause (i) and the proceeds of such Distributing Parent Worldwide Group Debt
were used to repay Distributing Parent Worldwide Group Debt incurred prior to
the relevant date described in clause (i) (“Distributing Parent Refinancing Debt”)
or were used to repay or refinance (including through successive refinancing)
Distributing Parent Refinancing Debt.
With respect to the External Controlled 2 Distribution, except as set forth below,
Distributing Parent has made all the representations in section 3 of the Appendix to
Rev. Proc. 2017-52.
(rr) Distributing Parent has made the following alternative representations:
Representations 3(a); 11(a); 15(a); 22(a); 31(a); 41(a).
(ss) Distributing Parent has not made the following representations, which do not
apply to the External Controlled 2 Distribution: Representations 7; 24; 25.
PLR-117976-19 31
(tt) Distributing Parent has not made the following representations: Representation
40 (but provided the required explanation).
(uu) Distributing Parent has made the following modified representations:
Representation 2: In the External Controlled 2 Distribution, Distributing Parent
will distribute, pursuant to the same plan, all of the stock and securities of
External Controlled 2 that it holds immediately before the External Controlled 2
Distribution.
Representation 5: None of the External Controlled 2 stock, External Controlled 2
Securities, External Controlled 2 Proceeds, or other property to be distributed in
the External Controlled 2 Distribution will be received in any capacity other than
that of a shareholder or creditor of Distributing Parent.
Representation 8: To the extent Distributing Parent transfers External Controlled
2 Securities and External Controlled 2 Proceeds to one or more holders of
Distributing Parent Worldwide Group Debt in exchange for Distributing Parent
Worldwide Group Debt, Distributing Parent will distribute such securities and
proceeds pursuant to an overall plan of reorganization.
Representation 17: Other than Business C Debt, any liabilities assumed (within
the meaning of section 357(d)) by External Controlled 2 were incurred in the
ordinary course of business and are associated with the assets transferred.
Representation 32: Other than amounts payable between Distributing Parent and
External Controlled 2 arising from the Transaction Agreements, no intercorporate
debt will exist between Distributing Parent and External Controlled 2 at the time
of, or subsequent to, the External Controlled 2 Distribution.
Representation 33: Payments made in connection with all continuing
transactions, if any, between Distributing Parent and External Controlled 2 after
the External Controlled 2 Distribution will be for fair market value based on arm’s-
length terms, except for certain transition services agreements, which will be on a
cost or cost-plus basis.
Representation 35: The payment of cash in lieu of fractional shares of External
Controlled 2 is solely for the purpose of avoiding the expense and inconvenience
of issuing fractional shares and does not represent separately bargained-for
consideration. The fractional share interests of each Distributing Parent
shareholder will be aggregated, and no Distributing Parent shareholder of record
will receive cash in an amount equal to or greater than the value of one full share
of External Controlled 2 (with the possible exception of shareholders who hold
Distributing Parent stock in multiple accounts or with multiple brokers).
PLR-117976-19 32
In addition, with respect to the External Controlled 2 Distribution, except as set forth
below, Distributing Parent has made all the representations set forth in section 3.04 of
Rev. Proc. 2018-53.
(vv) Distributing Parent has made the following modified representation:
Representation 4: Distributing Parent incurred the Distributing Parent Worldwide
Group Debt that will be assumed or satisfied (i)(A) before the date hereof and (B)
no later than 60 days before the earliest of the following dates (x) the date of the
first public announcement (as defined in Treas. Reg. § 1.355-7(h)(10)) of the
External Controlled 2 Distribution or a similar transaction, (y) the date of the entry
by Distributing Parent into a binding agreement to engage in the External
Controlled 2 Distribution or a similar transaction and (z) the date of approval of
the External Controlled 2 Distribution or a similar transaction by the Distributing
Parent board of directors, or (ii) on a date later than any such date described in
clause (i) and the proceeds of such Distributing Parent Worldwide Group Debt
were used to repay Distributing Parent Refinancing Debt or were used to repay
or refinance (including through successive refinancing) Distributing Parent
Refinancing Debt.
Distributing Parent has made the following representations relating to the Share
Repurchases:
(ww) The share repurchases will be motivated by a business purpose, and the stock
that will be repurchased in the Share Repurchases will be widely held.
(xx) The Share Repurchases will not be motivated to any extent by a desire to
increase or decrease the ownership percentage of any particular shareholder or
group of shareholders.
(yy) There is no plan or intention that the aggregate amount of stock purchased in the
Share Repurchases will equal or exceed 20 percent of the outstanding stock of
New Parent, External Controlled 1, or External Controlled 2 stock, as applicable.
(zz) To the extent that the Share Repurchases are made on the open market
(including through a Rule 10b5-1 plan, a purchase in compliance with Rule 10b-
18, or a tender offer), Distributing Parent (or New Parent), External Controlled 1,
or External Controlled 2, as applicable, does not expect to know the identity of
any shareholder from which stock will be repurchased. To the extent that the
Share Repurchases are made through an ASR program, Distributing Parent (or
New Parent), External Controlled 1, or External Controlled 2, as applicable, does
not expect to know with certainty the identity of any shareholder from which stock
is borrowed or purchased by each bank that participates in such ASR program.
PLR-117976-19 33
Distributing Parent has made the following representations relating to the Deemed
Liquidations:
(aaa) Other than the reincorporation of assets deemed distributed by FSub 6, the
Country C CTB Election will otherwise qualify as a tax-free liquidation under
section 332.
(bbb) Other than the reincorporation of assets deemed distributed by FSub 5, the
Country B CTB Election will otherwise qualify as a tax-free liquidation under
section 332.
(ccc) Other than the reincorporation of assets deemed distributed by FSub 10, the
FSub 10 CTB Election will otherwise qualify as a tax-free liquidation under
section 332.
(ddd) The value of all of FSub 10’s assets transferred to FSub 12 and FSub 11 in the
FSub 10 Contributions will not exceed 30 percent of the value of FSub 10’s gross
assets immediately prior to the FSub 10 CTB Election.
(eee) Other than the reincorporation of assets deemed distributed by FSub 18, the
Country F Amalgamation will otherwise qualify as a tax-free liquidation under
section 332.
Rulings
Based solely on the information and representations submitted, we rule as follows:
Controlled 1 Distribution
(1) No gain or loss will be recognized by Distributing 1 in the Controlled 1
Distribution. Section 355(c)(1).
(2) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 3 or Distributing Parent on its receipt of Controlled 1 stock
in the Controlled 1 Distribution. Section 355(a).
(3) The holding period of the Controlled 1 stock received by Distributing 3 and
Distributing Parent in the Controlled 1 Distribution will include the holding period
of the Distributing 1 stock exchanged therefor, provided that the Distributing 1
stock surrendered is held as a capital asset on the date of the Controlled 1
Distribution. Section 1223(1).
(4) The earnings and profits (“E&P”), if any, of each of Distributing 1 and Controlled
1 will be allocated in accordance with section 312(h) and Treas. Reg. § 1.312-
10(b), as applicable.
PLR-117976-19 34
Controlled 2 Distribution
(5) The Controlled 2 Contribution, together with the Controlled 2 Distribution, will be
a “reorganization” within the meaning of section 368(a)(1)(D). Distributing 1 and
Controlled 2 will each be a “party to a reorganization” within the meaning of
section 368(b).
(6) No gain or loss will be recognized by Distributing 1 in the Controlled 2
Contribution. Section 361(a).
(7) No gain or loss will be recognized by Controlled 2 in the Controlled 2
Contribution. Section 1032(a).
(8) Controlled 2’s basis in each asset received in the Controlled 2 Contribution will
equal the basis of such asset in the hands of Distributing 1 immediately before
the Controlled 2 Contribution. Section 362(b).
(9) The holding period in each asset received by Controlled 2 in the Controlled 2
Contribution will include the period during which such asset was held by
Distributing 1. Section 1223(2).
(10) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 4 on its receipt of Controlled 2 stock in the Controlled 2
Distribution. Section 355(a).
(11) No gain or loss will be recognized by Distributing 1 on its distribution of the
Controlled 2 stock to Distributing 4. Section 361(c).
(12) The basis of the Controlled 2 stock in the hands of Distributing 4 immediately
after the Controlled 2 Distribution will be the same as the basis of Distributing 1
stock exchanged therefor. Section 358(a)(1).
(13) The holding period of the Controlled 2 stock received by Distributing 4 in the
Controlled 2 Distribution will include the holding period of the Distributing 1 stock
exchanged therefor, provided that the Distributing 1 stock surrendered is held as
a capital asset on the date of the Controlled 2 Distribution. Section 1223(1).
(14) The E&P, if any, of each of Distributing 1 and Controlled 2 will be allocated in
accordance with section 312(h) and Treas. Reg. §§ 1.312-10(a) and 1.1502-33,
as applicable.
Controlled 3 Distribution
PLR-117976-19 35
(15) The Second Controlled 3 Contribution, together with the Controlled 3 Distribution,
will be a “reorganization” within the meaning of section 368(a)(1)(D). Distributing
1 and Controlled 3 will each be a “party to a reorganization” within the meaning of
section 368(b).
(16) No gain or loss will be recognized by Distributing 1 in the Second Controlled 3
Contribution. Section 361(a).
(17) No gain or loss will be recognized by Controlled 3 in the Second Controlled 3
Contribution. Section 1032(a).
(18) Controlled 3’s basis in each asset received in the Second Controlled 3
Contribution will equal the basis of such asset in the hands of Distributing 1
immediately before the Second Controlled 3 Contribution. Section 362(b).
(19) The holding period in each asset received by Controlled 3 in the Second
Controlled 3 Contribution will include the period during which such asset was
held by Distributing 1. Section 1223(2).
(20) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 4 on its receipt of Controlled 3 stock in the Controlled 3
Distribution. Section 355(a).
(21) No gain or loss will be recognized by Distributing 1 on its distribution of the
Controlled 3 stock to Distributing 4. Section 361(c).
(22) The holding period of the Controlled 3 stock received by Distributing 4 in the
Controlled 3 Distribution will include the holding period of the Distributing 1 stock
exchanged therefor, provided that the Distributing 1 stock surrendered is held as
a capital asset on the date of the Controlled 3 Distribution. Section 1223(1).
(23) The E&P, if any, of each of Distributing 1 and Controlled 3 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(a), as applicable.
First Controlled 4 Distribution
(24) No gain or loss will be recognized by Distributing 1 in the First Controlled 4
Distribution. Section 355(c)(1).
(25) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 2 on its receipt of Controlled 4 stock in the First Controlled
4 Distribution. Section 355(a).
(26) The holding period of the Controlled 4 stock received by Distributing 2 in the First
Controlled 4 Distribution will include the holding period of the Distributing 1 stock
PLR-117976-19 36
exchanged therefor, provided that the Distributing 1 stock surrendered is held as
a capital asset on the date of the First Controlled 4 Distribution. Section 1223(1).
(27) The E&P, if any, of each of Distributing 1 and Controlled 4 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(b), as applicable.
First Controlled 5 Distribution
(28) No gain or loss will be recognized by Distributing 1 in the First Controlled 5
Distribution. Section 355(c)(1).
(29) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 2 on its receipt of Controlled 5 stock in the First Controlled
5 Distribution. Section 355(a).
(30) The holding period of the Controlled 5 stock received by Distributing 2 in the First
Controlled 5 Distribution will include the holding period of the Distributing 1 stock
exchanged therefor, provided that the Distributing 1 stock surrendered is held as
a capital asset on the date of the First Controlled 5 Distribution. Section 1223(1).
(31) The E&P, if any, of each of Distributing 1 and Controlled 5 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(b), as applicable.
Second Controlled 4 Distribution
(32) No gain or loss will be recognized by Distributing 2 in the Second Controlled 4
Distribution. Section 355(c)(1).
(33) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 4 on its receipt of Controlled 4 stock in the Second
Controlled 4 Distribution. Section 355(a).
(34) The holding period of the Controlled 4 stock received by Distributing 4 in the
Second Controlled 4 Distribution will include the holding period of the Distributing
2 stock exchanged therefor, provided that the Distributing 2 stock surrendered is
held as a capital asset on the date of the Second Controlled 4 Distribution.
Section 1223(1).
(35) The E&P, if any, of each of Distributing 2 and Controlled 4 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(b), as applicable.
Second Controlled 5 Distribution
PLR-117976-19 37
(36) No gain or loss will be recognized by Distributing 2 in the Second Controlled 5
Distribution. Section 355(c)(1).
(37) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing 4 on its receipt of Controlled 5 stock in the Second
Controlled 5 Distribution. Section 355(a).
(38) The holding period of the Controlled 5 stock received by Distributing 4 in the
Second Controlled 5 Distribution will include the holding period of the Distributing
2 stock exchanged therefor, provided that the Distributing 2 stock surrendered is
held as a capital asset on the date of the Second Controlled 5 Distribution.
Section 1223(1).
(39) The E&P, if any, of each of Distributing 2 and Controlled 5 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(b), as applicable.
Distributing 2 Distribution
(40) No gain or loss will be recognized by Distributing 3 in the Distributing 2
Distribution. Section 355(c)(1).
(41) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing Parent on its receipt of Distributing 2 stock in the
Distributing 2 Distribution. Section 355(a).
(42) The holding period of the Distributing 2 stock received by Distributing Parent in
the Distributing 2 Distribution will include the holding period of the Distributing 3
stock with respect to which the distribution of Distributing 2 stock will be made,
provided that the Distributing 3 stock is held as a capital asset on the date of the
Distributing 2 Distribution. Section 1223(1).
(43) The E&P, if any, of each of Distributing 3 and Distributing 2 will be allocated in
accordance with section 312(h) and Treas. Reg. §§ 1.312-10(b) and 1.1502-33,
as applicable.
Controlled 6 Distribution
(44) No gain or loss will be recognized by Distributing 2 in the Controlled 6
Distribution. Section 355(c)(1).
(45) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing Parent on its receipt of Controlled 6 stock in the
Controlled 6 Distribution. Section 355(a).
PLR-117976-19 38
(46) The basis of the Controlled 6 stock in the hands of Distributing Parent
immediately after the Controlled 6 Distribution will be the same as the basis of
Distributing 2 stock exchanged therefor. Section 358(a)(1).
(47) The holding period of the Controlled 6 stock received by Distributing Parent in the
Controlled 6 Distribution will include the holding period of the Distributing 2 stock
exchanged therefor, provided that the Distributing 2 stock surrendered is held as
a capital asset on the date of the Controlled 6 Distribution. Section 1223(1).
(48) The E&P, if any, of each of Distributing 2 and Controlled 6 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(b), as applicable.
Controlled 7 Distribution
(49) No gain or loss will be recognized by Distributing 2 in the Controlled 7
Distribution. Section 355(c)(1).
(50) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing Parent on its receipt of Controlled 7 stock in the
Controlled 7 Distribution. Section 355(a).
(51) The basis of the Controlled 7 stock in the hands of Distributing Parent
immediately after the Controlled 7 Distribution will be the same as the basis of
Distributing 2 stock exchanged therefor. Section 358(a)(1).
(52) The holding period of the Controlled 7 stock received by Distributing Parent in the
Controlled 7 Distribution will include the holding period of the Distributing 2 stock
exchanged therefor, provided that the Distributing 2 stock surrendered is held as
a capital asset on the date of the Controlled 7 Distribution. Section 1223(1).
(53) The E&P, if any, of each of Distributing 2 and Controlled 7 will be allocated in
accordance with section 312(h) and Treas. Reg. § 1.312-10(b), as applicable.
Business B Distribution
(54) For Federal income tax purposes, the Business B Distribution will be treated as if
Distributing 5 contributed assets to Controlled 9 and then distributed all of the
Controlled 9 stock to Distributing Parent. See Rev. Rul. 77-191, 1971-1 C.B. 94,
Rev. Rul. 57-311, 1957-2 C.B. 243.
(55) The Business B Contribution, together with the Business B Distribution, will be a
“reorganization” within the meaning of section 368(a)(1)(D). Distributing 5 and
Controlled 9 will each be a “party to a reorganization” within the meaning of
section 368(b).
PLR-117976-19 39
(56) No gain or loss will be recognized by Distributing 5 in the Business B
Contribution. Section 361(a).
(57) No gain or loss will be recognized by Controlled 9 in the Business B Contribution.
Section 1032(a).
(58) Controlled 9’s basis in each asset received in the Business B Contribution will
equal the basis of such asset in the hands of Distributing 5 immediately before
the Business B Contribution. Section 362(b).
(59) The holding period in each asset received by Controlled 9 in the Business B
Contribution will include the period during which such asset was held by
Distributing 5. Section 1223(2).
(60) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing Parent on its receipt of Controlled 9 stock in the Business
B Distribution. Section 355(a).
(61) No gain or loss will be recognized by Distributing 5 on its distribution of the
Controlled 9 stock to Distributing Parent. Section 361(c).
(62) The holding period of the Controlled 9 stock received by Distributing Parent in the
Business B Distribution will include the holding period of the Distributing 5 stock
with respect to which the distribution of the Controlled 9 stock will be made,
provided that the Distributing 5 stock is held as a capital asset on the date of the
Business B Distribution. Section 1223(1).
(63) Distributing 5’s E&P will be allocated between Distributing 5 and Controlled 9 in
allocated with section 312(h) and Treas. Reg. § 1.312-10(a), as applicable.
Business C Distribution
(64) For Federal income tax purposes, the Business C Distribution will be treated as if
Distributing 5 contributed assets to Controlled 10 and then distributed all of the
Controlled 10 stock to Distributing Parent. See Rev. Rul. 77-191, 1971-1 C.B. 94,
Rev. Rul. 57-311, 1957-2 C.B. 243.
(65) The Business C Contribution, together with the Business C Distribution will be a
“reorganization” within the meaning of section 368(a)(1)(D). Distributing 5 and
Controlled 10 will each be a “party to a reorganization” within the meaning of
section 368(b).
(66) No gain or loss will be recognized by Distributing 5 in the Business C
Contribution. Section 361(a).
PLR-117976-19 40
(67) No gain or loss will be recognized by Controlled 10 in the Business C
Contribution. Section 1032(a).
(68) Controlled 10’s basis in each asset received in the Business C Contribution will
equal the basis of such asset in the hands of Distributing 5 immediately before
the Business C Contribution. Section 362(b).
(69) The holding period in each asset received by Controlled 10 in the Business C
Contribution will include the period during which such asset was held by
Distributing 5. Section 1223(2).
(70) No gain or loss will be recognized by (and no amount will be included in the
income of) Distributing Parent on its receipt of Controlled 10 stock in the
Business C Distribution. Section 355(a).
(71) No gain or loss will be recognized by Distributing 5 on its distribution of the
Controlled 10 stock to Distributing Parent. Section 361(c).
(72) The holding period of the Controlled 10 stock received by Distributing Parent in
the Business C Distribution will include the holding period of the Distributing 5
stock with respect to which the distribution of the Controlled 10 stock will be
made, provided that the Distributing 5 stock is held as a capital asset on the date
of the Business C Distribution. Section 1223(1).
(73) Distributing 5’s E&P will be allocated between Distributing 5 and Controlled 10 in
accordance with section 312(h) and Treas. Reg. § 1.312-10(a), as applicable.
External Controlled 1 Distribution
(74) The External Controlled 1 Contribution, together with the External Controlled 1
Distribution, will be a “reorganization” within the meaning of section 368(a)(1)(D).
Distributing Parent and External Controlled 1 will each be a “party to a
reorganization” within the meaning of section 368(b).
(75) No gain or loss will be recognized by Distributing Parent in the External
Controlled 1 Contribution under section 361(a), and, to the extent Distributing
Parent is treated as the initial obligor of the Business B Debt, under section
357(a). See Rev. Rul. 79-258.
(76) No gain or loss will be recognized by External Controlled 1 in the External
Controlled 1 Contribution. Section 1032(a).
(77) External Controlled 1’s basis in each asset received in the External Controlled 1
Contribution will equal the basis of such asset in the hands of Distributing Parent
PLR-117976-19 41
immediately before the External Controlled 1 Contribution. Section 362(b).
(78) The holding period in each asset received by External Controlled 1 in the
External Controlled 1 Contribution will include the period during which such asset
was held by Distributing Parent. Section 1223(2).
(79) No gain or loss will be recognized by (and no amount will be included in the
income of) the Public Shareholders upon the receipt of External Controlled 1
stock in the External Controlled 1 Distribution. Section 355(a).
(80) No gain or loss will be recognized by Distributing Parent on its distribution of the
External Controlled 1 stock to the Public Shareholders or on its transfer of
External Controlled 1 Securities to its creditors and/or security holders. Section
361(c).
(81) The aggregate basis of the Distributing Parent stock and the External Controlled
1 stock in the hands of the Public Shareholders after the External Controlled 1
Distribution (including any fractional share interest in External Controlled 1 stock
to which the shareholder may be entitled) will equal the aggregate basis of the
Distributing Parent stock held by the Public Shareholders immediately before the
External Controlled 1 Distribution, allocated in the manner described in Treas.
Reg. § 1.358-2(a)(2). Section 358(b).
(82) The holding period of the External Controlled 1 stock received by the Public
Shareholders in the External Controlled 1 Distribution (including any fractional
share interest in External Controlled 1 stock to which the shareholder may be
entitled) will include the holding period of the Distributing Parent stock with
respect to which the distribution of the External Controlled 1 stock will be made,
provided that the Distributing Parent stock is held as a capital asset on the date
of the External Controlled 1 Distribution. Section 1223(1).
(83) Distributing Parent’s E&P will be allocated between Distributing Parent and
External Controlled 1 in accordance with section 312(h) and Treas. Reg. §§
1.312-10(a) and 1.1502-33(e), as applicable.
(84) To the extent External Controlled 1 is treated as the initial obligor of the Business
B Debt, the First Debt Cash Purge will be treated as being distributed pursuant to
the plan of reorganization for purposes of section 361(b)(1)(A) and 361(b)(3).
Distributing Parent will not be required to segregate or otherwise trace the
External Controlled 1 Proceeds.
(85) The receipt by Public Shareholders of cash in lieu of fractional shares of External
Controlled 1 stock will be treated for Federal income tax purposes as if the
fractional shares had been distributed to the Public Shareholders as part of the
External Controlled 1 Distribution and then had been disposed of by such
PLR-117976-19 42
shareholders for the amount of such cash in a sale or exchange. The gain (or
loss) recognized (determined using the basis allocated to the fractional shares in
Ruling 81), if any, will be treated as capital gain (or loss), provided the stock was
held as a capital asset by the selling shareholder. Section 1001. Such gain (or
loss) will be short-term or long-term capital gain (or loss) (determined using the
holding period provided in Ruling 82).
External Controlled 2 Distribution
(86) The External Controlled 2 Contribution, together with the External Controlled 2
Distribution, will be a “reorganization” within the meaning of section 368(a)(1)(D).
Distributing Parent and External Controlled 2 will each be a “party to a
reorganization” within the meaning of section 368(b).
(87) No gain or loss will be recognized by Distributing Parent in the External
Controlled 2 Contribution under section 361(a), and, to the extent Distributing
Parent is treated as the initial obligor of the Business C Debt, under section
357(a). See Rev. Rul. 79-258.
(88) No gain or loss will be recognized by External Controlled 2 in the External
Controlled 2 Contribution. Section 1032(a).
(89) External Controlled 2’s basis in each asset received in the External Controlled 2
Contribution will equal the basis of such asset in the hands of Distributing Parent
immediately before the External Controlled 2 Contribution. Section 362(b).
(90) The holding period in each asset received by External Controlled 2 in the
External Controlled 2 Contribution will include the period during which such asset
was held by Distributing Parent. Section 1223(2).
(91) No gain or loss will be recognized by (and no amount will be included in the
income of) the Public Shareholders upon the receipt of External Controlled 2
stock in the External Controlled 2 Distribution. Section 355(a).
(92) No gain or loss will be recognized by Distributing Parent on its distribution of the
External Controlled 2 stock to the Public Shareholders or on its transfer of
External Controlled 2 Securities to its creditors and/or security holders. Section
361(c).
(93) The aggregate basis of the Distributing Parent stock and the External Controlled
2 stock in the hands of the Public Shareholders after the External Controlled 2
Distribution (including any fractional share interest in External Controlled 2 stock
to which the shareholder may be entitled) will equal the aggregate basis of the
Distributing Parent stock held by the Public Shareholders immediately before the
External Controlled 2 Distribution, allocated in the manner described in Treas.
PLR-117976-19 43
Reg. § 1.358-2(a)(2). Section 358(b).
(94) The holding period of the External Controlled 2 stock received by the Public
Shareholders in the External Controlled 2 Distribution (including any fractional
share interest in External Controlled 2 stock to which the shareholder may be
entitled) will include the holding period of the Distributing Parent stock with
respect to which the distribution of the External Controlled 2 stock will be made,
provided that the Distributing Parent stock is held as a capital asset on the date
of the External Controlled 2 Distribution. Section 1223(1).
(95) Distributing Parent’s E&P will be allocated between Distributing Parent and
External Controlled 2 in accordance with section 312(h) and Treas. Reg. §§
1.312-10(a) and 1.1502-33(e), as applicable.
(96) To the extent External Controlled 2 is treated as the initial obligor of the Business
C Debt, the Second Debt Cash Purge will be treated as being distributed
pursuant to the plan of reorganization for purposes of section 361(b)(1)(A) and
361(b)(3). Distributing Parent will not be required to segregate or otherwise trace
the External Controlled 2 Proceeds.
(97) The receipt by Public Shareholders of cash in lieu of fractional shares of External
Controlled 2 stock will be treated for Federal income tax purposes as if the
fractional shares had been distributed to the Public Shareholders as part of the
External Controlled 2 Distribution and then had been disposed of by such
shareholders for the amount of such cash in a sale or exchange. The gain (or
loss) recognized (determined using the basis allocated to the fractional shares in
Ruling 93), if any, will be treated as capital gain (or loss), provided the stock was
held as a capital asset by the selling shareholder. Section 1001. Such gain (or
loss) will be short-term or long-term capital gain (or loss) (determined using the
holding period provided in Ruling 94).
Plan Acquisitions and Share Repurchases
(98) In any direct or indirect acquisition of stock of Distributing Parent, External
Controlled 1, or External Controlled 2 (or any predecessor or successor within
the meaning of Treas. Reg. § 1.355-8T) that is treated as part of a plan (or series
of related transactions) with the Proposed Transaction under section
355(e)(2)(A)(ii) (a “Relevant Acquisition”), the increase in the ownership
percentage of either voting power or value of the stock of Distributing Parent,
External Controlled 1, or External Controlled 2 (or any predecessor or successor)
acquired, directly or indirectly, by any person, will be treated as an acquisition
that is taken into account for purposes of section 355(e) only after reducing such
increase by any direct or indirect decrease in such ownership percentage of such
person resulting from such Relevant Acquisition, determined, in the case of any
shareholder that is a widely held investment vehicle with public investors (for
PLR-117976-19 44
example, a mutual fund or an exchange-traded fund) without regard to any
changes in ownership of such investment vehicles by their public investors.
(99) To the extent that Distributing Parent shareholders are also Target B
shareholders immediately prior to the Distributing Merger, the increase in direct
or indirect (based on the attribution principles under section 318(a)(2)(C))
ownership percentage of Distributing Parent stock by reason of being a Target B
shareholder immediately prior to the Distributing Merger is offset by the decrease
in such ownership percentage by reason of being a Distributing Parent
shareholder immediately prior to the Distributing Merger for purposes of section
355(e). In the case of a widely-held investment vehicle with public investors (for
example, a mutual fund or an exchange-traded fund), this offset is determined
without regard to changes of such investment vehicles by their public
shareholders.
(100) For purposes of section 355(e), in calculating the offset, by reason of being a
Distributing Parent shareholder immediately prior to the Distributing Merger, of
any increase of a shareholder’s Distributing Parent stock ownership percentage,
Distributing Parent, absent actual knowledge to the contrary, may rely upon the
publicly filed documents reporting ownership as of the closest point in time
preceding the Distributing Merger that disclose the relevant shareholders’
ownership percentage of stock in the relevant corporation.
(101) To the extent that Distributing Parent shareholders are also Target A
shareholders immediately prior to the Target A Merger, the increase in direct or
indirect (based on attribution principles under section 318(a)(2)(C)) ownership
percentage of Distributing Parent stock by reason of being a Target A
shareholder immediately prior to the Target A Merger is offset by the decrease in
such ownership percentage by reason of being a Distributing Parent shareholder
immediately prior to the Target A Merger for purposes of section 355(e). In the
case of a widely-held investment vehicle with public investors (for example, a
mutual fund or an exchange-traded fund), this offset is determined without regard
to changes in ownership of such investment vehicles by their public
shareholders.
(102) For purposes of section 355(e), in calculating the offset, by reason of being a
Distributing Parent shareholder immediately prior to the Target A Merger, of any
increase of a shareholder’s Distributing Parent stock ownership percentage,
Distributing Parent, absent actual knowledge to the contrary, may rely upon the
publicly filed documents reporting ownership as of the closest point in time
preceding the Target A Merger that disclose the relevant shareholders’
ownership percentage of stock in the relevant corporation.
(103) To the extent the Share Repurchases are treated as part of a plan (or series of
related transactions) with the Proposed Transaction for purposes of section
PLR-117976-19 45
355(e), the Share Repurchases will be treated as being made from all public
shareholders (defined as a shareholder who is not a “controlling shareholder” or
“ten-percent shareholder” within the meaning of Treas. Reg. § 1.355-7(h)(3) and
(14)) of Distributing Parent (or New Parent), External Controlled 1, or External
Controlled 2, as applicable, on a pro rata basis for purposes of testing the effect
of the Share Repurchases on the Proposed Transaction under section 355(e)
and Treas. Reg. § 1.355-7.
For purposes of this ruling, each holder of Distributing Parent (or New Parent),
External Controlled 1, or External Controlled 2 shares will only be treated as a
public shareholder until five business days after either (i) the vice president of
investor relations (or a functionally similar position) of Distributing Parent (or New
Parent), External Controlled 1, or External Controlled 2, as applicable, obtains
actual knowledge or (ii) a Schedule 13D, Schedule 13G, Form 3, or Form 4, is
filed indicating that such shareholder holds enough shares to be considered a
five-percent shareholder within the meaning of Treas. Reg. § 1.355-7(h)(8) (and
such shareholder actively participates in the management or operation of
Distributing Parent (or New Parent), External Controlled 1, or External Controlled
2, as applicable, as described in Treas. Reg. § 1.355-7(h)(3)) or a ten-percent
shareholder within the meaning of Treas. Reg. § 1.355-7(h)(4). For purposes of
determining whether a five-percent shareholder or a ten-percent shareholder
exists, Distributing Parent (or New Parent), External Controlled 1, and External
Controlled 2 may disregard a Schedule 13G unless Item 6 reports such a
shareholder or is left blank, or the filer discloses its status as a five-percent
shareholder or a ten-percent shareholder on Form 3 or Form 4.
(104) For purposes of section 355(e), the sales (or deemed sales) of any fractional
shares of Distributing Parent (or New Parent), External Controlled 1, or External
Controlled 2 stock in the market in connection with the External Distributions will
not be treated as acquisitions that are a part of a plan (or series of related
transactions) that includes the Proposed Transaction.
Deemed Liquidations
(105) The transfer of assets by FSub 7 to NewCo 4 in the NewCo 4 Contribution and to
NewCo 5 in the NewCo 5 Contribution will not preclude the Country C CTB
Election from otherwise qualifying as a “complete liquidation” within the meaning
of section 332.
(106) The transfer of assets by FSub 9 to Controlled 1 in the Controlled 1 Contribution,
to Controlled 3 in the Controlled 3 Contribution, and to NewCo 7 in the NewCo 7
Contribution will not preclude the Country B CTB Election from otherwise
qualifying as a “complete liquidation” within the meaning of section 332.
PLR-117976-19 46
(107) The transfer of assets by FSub 10 to FSub 12 in the FSub 12 Contribution and to
FSub 11 in the FSub 11 Contribution, as well as the assets transferred by FSub 9
to Controlled 1 in the Controlled 1 Contribution, to Controlled 3 in the First
Controlled 3 Contribution, and to NewCo 7 in the NewCo 7 Contribution, will not
preclude the FSub 10 CTB Election from otherwise qualifying as a “complete
liquidation” within the meaning of section 332.
(108) The deemed transfer of assets by Distributing 5 to Controlled 9 in the Business B
Contribution and to Controlled 10 in the Business C Contribution will not preclude
the Country F Amalgamation from otherwise qualifying as a “complete
liquidation” within the meaning of section 332.
Caveats
Except as expressly provided herein, no opinion is expressed or implied concerning the
tax treatment of the Proposed Transaction under other provisions of the Code or
regulations or the tax treatment of any condition existing at the time of, or effects
resulting from, the Proposed Transaction that is not specifically addressed by this letter.
Procedural Statements
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
A copy of this letter should be attached to the federal income tax return to which it is
relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date on and
control number (PLR-117976-19) of this letter ruling.
In accordance with the power of attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.
Sincerely,
William W. Burhop
Senior Technician Reviewer, Branch 5
Office of Associate Chief Counsel (Corporate)
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