A tax-free spin-off separating two businesses, with rulings that the parent can use the deal's borrowed cash and stock to retire its own debt without triggering tax

Plain-English summary

A publicly traded parent company (Distributing) runs two business lines and wants to separate one of them (Business B) into a standalone public company (Controlled) and hand Controlled's stock to its shareholders. This is a classic "spin-off," and when it meets the requirements of Internal Revenue Code § 355 and qualifies as a § 368(a)(1)(D) reorganization, neither the parent nor its shareholders owe tax on the separation. The parent asked the IRS to bless the structure, which also includes a common Wall Street "debt monetization" feature: Controlled borrows cash and issues debt securities to the parent, the parent takes those proceeds and securities and uses them to pay down its own existing debt (partly through "debt-for-debt" and "debt-for-equity" exchanges routed through an investment bank), and the parent may temporarily keep a small retained stake (the "Remainder Shares") to unwind later. The IRS issued 17 favorable rulings: the contribution and distribution qualify as a tax-free reorganization, the parent and Controlled recognize no gain on the contribution, shareholders recognize no gain on receiving Controlled stock, basis and holding periods carry over, and using the borrowed proceeds and securities to retire the parent's debt fits within § 361 without tax. Consistent with its standard practice for spin-off rulings, the IRS expressly did not rule on the three big judgment calls: the business-purpose requirement, whether the deal is a "device" for distributing earnings, and whether it is part of a plan to acquire a 50-percent interest under § 355(e). This matters because large corporate separations depend on these rulings to give the parent, the new company, and public shareholders confidence that the split, and the debt paydown financed by it, will not be taxed.

Ruling snapshot

• Question: Does a parent's separation of one business into a new public company, combined with debt-for-debt and debt-for-equity exchanges to retire the parent's debt, qualify as a tax-free spin-off and reorganization?
• Outcome: Approved (17 rulings; nonrecognition under §§ 355, 361, 368(a)(1)(D); business purpose, device, and § 355(e) questions expressly not ruled on)
• Key authorities: IRC §§ 355, 361, 368(a)(1)(D), 357, 358, 362, 1032, 1223, 312(h); Rev. Proc. 2017-52; Rev. Proc. 2018-53; Arrowsmith v. Commissioner, 344 U.S. 6 (1952)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202151001 Third Party Communication: None
Release Date: 12/23/2021 Date of Communication: Not Applicable
Index Number: 355.00-00, 355.01-00,
355.01-01, 368.00-00, Person To Contact:
368.04-00, 361.00-00 -------------------------------, ID No. -----------
Telephone Number:
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-------------------------- Refer Reply To:
------------------------------------------------------------ CC:CORP:BO5
---------------------------- PLR-108911-21
---------------------------- Date:
September 24, 2021

LEGEND:

Distributing = ------------------------------------------------------------
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US DRE =
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Controlled = -----------------------------
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US Sub 1 =
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US Sub 2 =
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US Sub 3 =
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State A = -------------
State B = -------------
PLR-108911-21 2

Business A = -----------------------------------------------------------------------
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Business B = -------------------------------------------------------------

a = ---

b = -----

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d = ------------------

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g = --

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Continuing Arrangements = ----------------------------------------------------------------------
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Commercial = ----------------------------------------------------------------------
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PLR-108911-21 4

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Dear -------------------:

This letter responds to your letter dated March 24, 2021, as supplemented by
subsequent information and documentation, requesting rulings on certain federal
income tax consequences of a series of transactions (the “Proposed Transaction”).
The material information submitted in that request and subsequent correspondence is
summarized below.

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 section 368 of the Internal Revenue
Code (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 upon 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 Distribution (defined
below): (i) satisfies the business purpose requirement of Treas. Reg. §1.355-2(b),
(ii) is used principally as a device for the distribution of the earnings and profits of the
distributing corporation or the controlled corporation or both (see section 355(a)(1)(B)
and Treas. Reg. §1.355-2(d)), or (iii) is part of a plan (or series of related transactions)
pursuant to which one or more persons will acquire directly or indirectly stock
representing a 50-percent or greater interest in the distributing corporation or the
controlled corporation, or any predecessor or successor of the distributing corporation
or the controlled corporation, within the meaning of Treas. Reg. §1.355-8 (see section
355(e)(2)(A)(ii) and Treas. Reg. §1.355-7).
PLR-108911-21 5

                                 Summary of Facts

Distributing, a publicly traded State A corporation, is the parent of a worldwide group
that includes both domestic and foreign entities. Distributing and its domestic affiliates
join in the filing of a consolidated U.S. federal income tax return. At the time of the
Proposed Transaction, Distributing has a single class of voting common stock issued
and outstanding, approximately a percent of which is owned by US Sub 1, a State B
corporation directly and wholly owned by Distributing. Prior to the Proposed
Transaction, Distributing is engaged in Business A and Business B directly and
through domestic and foreign subsidiaries.

Immediately before the Proposed Transaction, Distributing owns all the membership
interests in US DRE, a newly organized State B limited liability company disregarded
from Distributing for U.S. federal income tax purposes. US DRE, in turn, wholly owns
US Sub 2, a newly organized State B limited liability company that is classified as a
corporation for U.S. federal income tax purposes. US Sub 2 wholly owns US Sub 3, a
newly organized State B corporation. Immediately before the Proposed Transaction
and as a result of the internal restructuring transactions, US Sub 3 holds, directly or
indirectly, substantially all the assets, liabilities, and entities of Business B. Distributing
also has multiple tranches of long-term, third-party debt outstanding (the Distributing
Debt).

For purposes of satisfying the active trade or business requirement of section 355(b)
with respect to the Distribution (defined below), (i) Distributing will rely upon Business
A conducted by members of its “separate affiliated group” as defined in section
355(b)(3)(B); and (ii) Controlled will rely upon Business B conducted by members of its
“separate affiliated group” as defined in section 355(b)(3)(B). Financial information has
been submitted in accordance with Rev. Proc. 2017-52 indicating that each of
Business A and Business B has had gross receipts and operating expenses
representing the active conduct of a trade or business for each of the past five years.

                          Internal Restructuring Transactions

In preparation for the Proposed Transaction, Distributing has undertaken and will
undertake a series of internal restructuring transactions to separate Business B from
Business A. Through these transactions, Distributing and its subsidiaries will transfer
Business B to US DRE in a manner that places Business B in or underneath US DRE.

                               Proposed Transaction

For what are represented to be valid business reasons, Distributing will undertake the
following steps (the Proposed Transaction) to separate Business B from Business A:

1. Prior to the record date for the Distribution (defined below), US Sub 1 will
   exchange its Distributing common stock for shares of a new class of stock of
   PLR-108911-21 6

   Distributing (the New Shares).
   

2. Distributing will cause US DRE to convert to a State B corporation
   (Controlled), as a result of which Distributing will hold all of the common
   stock of Controlled.

3. Controlled will borrow cash from one or more third-party lenders (the
   “Controlled Debt”).

4. Controlled (i) will distribute some or all of the proceeds from the Controlled
   Debt to Distributing (the “Controlled Distributed Debt Proceeds”), and (ii)
   may issue debt securities of Controlled to Distributing (the “Controlled
   Securities”) ((i) and (ii) together with Steps 2 and 3 collectively, the
   “Contribution”). Distributing will not segregate the Controlled Distributed
   Debt Proceeds in a separate bank account or otherwise. Within b days after
   the date of the Distribution (defined below), Distributing will use funds equal
   to at least the aggregate amount of the Controlled Distributed Debt
   Proceeds to (i) satisfy Distributing Debt, (ii) make distributions to
   Distributing’s shareholders, (iii) repurchase shares of the common stock of
   Distributing (but not New Shares), and/or (iv) repay ordinary course
   liabilities.

5. Distributing will distribute at least 80 percent of the common stock of
   Controlled pro rata to Distributing’s public common shareholders (the
   “Distribution”).

   Distributing may retain up to c percent of the common stock of Controlled
   (any such retained Controlled shares, the “Remainder Shares”).
   

6. Concurrently with the Distribution, Distributing will distribute additional New
   Shares to US Sub 1.

7. Before or within b days after the Distribution (except as otherwise specified
   below), the following steps may occur (collectively, the “Debt-for-Debt
   Exchange”):

   (a) An investment bank (the “Bank”) will make a loan to Distributing (the
       “First Refinancing Debt”) in an amount based on the anticipated fair
       market value of the Controlled Securities with a maturity date of d. The
       cash proceeds from the issuance of the First Refinancing Debt will not
       be segregated in a separate bank account or otherwise. Within b days
       following the date of the Distribution, Distributing will use an amount
       equal to the proceeds of the First Refinancing Debt to pay principal,
       interest or premium on Distributing Debt.
   

   PLR-108911-21 7

   (b) At least e days after issuance of the First Refinancing Debt, Distributing
       will enter into an exchange agreement with Bank pursuant to which
       Distributing will transfer Controlled Securities to Bank in exchange for
       (and in retirement of) the First Refinancing Debt (the “Debt-for-Debt
       Exchange Agreement”). The pricing of the Controlled Securities and the
       exchange ratio for the Debt-for-Debt Exchange will be fixed on the date
       that the Debt-for-Debt Exchange Agreement is entered into.
   
      Between f days and g days after Distributing and Bank enter into the
      Debt-for-Debt Exchange Agreement, Distributing will deliver the
      Controlled Securities to Bank in satisfaction of the First Refinancing Debt.
      In all cases, the Debt-for-Debt Exchange Agreement will be entered into
      and the Controlled Securities will be transferred to Bank in satisfaction of
      the First Refinancing Debt within b days of the date of the Distribution.
   

8. After the Distribution, the following steps may occur if Distributing retains
   the Remainder Shares (collectively, the “Debt-for-Equity Exchange,” and
   together with the Debt-for-Debt Exchange, the “Debt Exchanges”):

   (a) Bank will make a loan to Distributing (the “Second Refinancing Debt”) in
       an amount based upon the anticipated fair value of the Remainder
       Shares with a maturity date of d. The cash proceeds from the issuance
       of the Second Refinancing Debt will not be segregated in a separate
       bank account or otherwise. Within b days following the date of the
       Distribution, Distributing will use an amount equal to the proceeds of the
       Second Refinancing Debt to pay principal, interest or premium on
       Distributing Debt.
   
   (b) At least e days after issuance of the Second Refinancing Debt, Distributing
       will enter into an exchange agreement with Bank pursuant to which
       Distributing will transfer some or all of the Remainder Shares to Bank in
       exchange for (and in retirement of) the Second Refinancing Debt (the
       “Debt-for-Equity Exchange Agreement”). The pricing of the Remainder
       Shares and the exchange ratio for the Debt-for-Equity Exchange will be
       fixed on the date that the Debt-for-Equity Exchange Agreement is
       entered into.
   
       Between f days and g days after Distributing and Bank enter into the
       Debt-for-Equity Exchange Agreement, Distributing will deliver the
       Remainder Shares to the Bank in satisfaction of the Second Refinancing
       Debt. In all cases, the Debt-for-Equity Exchange Agreement will be
       entered into and the Remainder Shares will be transferred to Bank in
       satisfaction of the Second Refinancing Debt within b days of the date of
       the Distribution.
   

   9. If Distributing retains the Remainder Shares and determines that market and
      PLR-108911-21 8

      general economic conditions and sound business judgment do not support
      the Debt-for-Equity Exchange of all or a portion of the Remainder Shares
      during the b days following the date of the Distribution, Distributing may
      (i) distribute such shares within b days of the date of the Distribution pro rata
      to its public common shareholders (a “Clean-Up Spin”) or pursuant to an
      exchange offer in redemption of public common shares (a “Clean-Up Split”),
      or (ii) sell the Remainder Shares in one or more public or private sales as
      soon as practicable, taking into account market and general economic
      conditions and sound business judgment, but in no event later than g years
      after the date of the Distribution.

      In the event of a Clean-Up Spin, Distributing will simultaneously distribute
      additional New Shares to US Sub 1.

In connection with the Proposed Transaction, Distributing and Controlled will have
continuing commercial arrangements (the Commercial Arrangements) and will enter
into certain customary agreements (collectively, the Continuing Arrangements). The
Commercial Arrangements and the Continuing Arrangements will be based on arm’s
length terms and conditions, except for the Transition Services Agreements, which will
be on a cost or cost-plus basis during their terms.

                                Representations

The following representations have been made with respect to the Proposed
Transaction:

Except as set forth below, Distributing has made all the representations in section 3
of the Appendix to Rev. Proc. 2017-52 with respect to the Proposed Transaction.

1. Distributing has made the following alternative representations: 3(a), 11(a),
   15(a), 22(b), 31(a), 41(a).

2. Distributing has not made the following representations, which do not apply to the
   Distribution: 24, 25, and 40.

3. Distributing has made the following modified representations:

   Representation 2: In the Distribution, Distributing will distribute at least 80
   percent of the stock of Controlled.

   Representation 4: Other than the Controlled Securities, no indebtedness owed
   by Controlled to Distributing after the Distribution will constitute stock or
   securities of Controlled or any other entity.

   Representation 5: Other than the Remainder Shares transferred in the Debt-for-
   PLR-108911-21 9

   Equity Exchange and any Controlled Securities transferred in any Debt-for-Debt
   Exchange, none of the Controlled stock, Controlled Securities, or Other
   Property to be distributed in the Distribution will be received in any capacity
   other than that of a shareholder of Distributing.

   Representation 7: For purposes of any Clean-up Split, the fair market value of
   Controlled stock or Other Property to be received by each shareholder of
   Distributing that surrenders Distributing stock will be approximately equal to the
   fair market value of Distributing stock surrendered by the shareholder in the
   transaction.

   Representation 8(b): Distributing may have securities outstanding, but it will not
   distribute Controlled stock, the Controlled Securities or Other Property to any
   holder of such securities in the Distribution, in satisfaction thereof, except
   potentially in satisfaction of a portion of the Distributing Debt pursuant to any
   Debt Exchanges.

   Representation 17: Other than the Controlled Debt and the Controlled
   Securities, any liabilities assumed (within the meaning of section 357(d)) by
   Controlled were incurred in the ordinary course of business and are associated
   with any assets transferred.

   Representation 23: Other than with respect to: (i) certain third-party and tax
   obligations and receivables arising in the ordinary course of business; and,
   potentially, (ii) certain pension obligations and other post-employment benefits
   obligations and certain deferred revenue amounts associated with Business B
   that may be transferred to Controlled, the Distribution does not involve and will
   not result in a situation in which one party recognizes income but another party
   recognizes the deductions associated with such income or a situation in which
   one party owns Property but another party recognizes the income associated
   with such Property. Any mismatch will not result in a material distortion of
   income.

   Representation 32: Except for under the Continuing Arrangements, ordinary
   course payables and receivables and, in the event the Debt-for-Debt Exchange
   is not completed prior to the Distribution, the Controlled Securities, no
   intercorporate debt will exist between Distributing and Controlled at the time of,
   or subsequent to, the Distribution of Controlled stock.

   Representation 33: Except as contemplated by any Transition Services
   Agreements, payments made in connection with all continuing transactions,
   including the Commercial Arrangements, between Distributing and Controlled
   after the Distribution will be based on arm’s-length terms.

   Representation 35: The payment of cash in lieu of fractional shares of
   Controlled in connection with the Distribution is solely for the purpose of
   PLR-108911-21 10

   avoiding the expense and inconvenience of issuing fractional shares and does
   not represent separately bargained-for consideration. The fractional share
   interests of each Distributing shareholder will be aggregated and no Distributing
   shareholder of record will receive cash in an amount equal to or greater than the
   value of one full share of Controlled (with the possible exception of shareholders
   who hold Distributing stock in multiple accounts or plans or with multiple
   brokers).

   Representation 46: Other than the Controlled Debt, Controlled will not issue
   stock or securities to a person other than Distributing in anticipation of the
   Distribution.

Except as set forth below, Distributing has made all the representations in section 3.04
of Rev. Proc. 2018-53 with respect to the Distribution.

4. Distributing has made the following modified representations:

   Representation 4: Distributing incurred the Distributing Debt that will be assumed
   or satisfied (i)(a) before the request for any relevant ruling is submitted and (b) no
   later than 60 days before the earliest of the following dates: (1) the date of the
   first public announcement (as defined in section 1.355-7(h)(10)) of the
   Distribution or a similar transaction, (2) the date of the entry by Distributing into
   a binding agreement to engage in the Distribution or a similar transaction, and
   (3) the date of approval of the Distribution or a similar transaction by the board
   of directors of Distributing, or (ii) on a date later than such date described in
   clause (i) and the proceeds of such debt (the First Refinancing Debt and the
   Second Refinancing Debt) were used to repay Distributing Debt incurred prior
   to the relevant date described in clause (i).

   Representation 6: There are one or more substantial business reasons for any
   delay in satisfying Distributing Debt with the Controlled Distributed Debt
   Proceeds or the proceeds of the First Refinancing Debt or the Second
   Refinancing Debt, or in satisfying the First Refinancing Debt or the Second
   Refinancing Debt with the Controlled Securities or the Remainder Shares, as
   applicable, beyond 30 days after the date of the first distribution of Controlled
   stock to Distributing’s shareholders. All the Distributing Debt that will be
   satisfied with the Controlled Distributed Debt Proceeds, the proceeds of the
   First Refinancing Debt or the Second Refinancing Debt will be satisfied no later
   than b days after such distribution. All the First Refinancing Debt or the Second
   Refinancing Debt that will be satisfied by the Controlled Securities or the
   Remainder Shares will be satisfied no later than b days after such distribution.

Distributing has made the following additional representations:

5. The retention of any Remainder Shares is for sufficient business purposes.
   PLR-108911-21 11

6. None of Distributing’s directors or officers will serve as directors or officers of
   Controlled as long as Distributing retains any Remainder Shares.

7. Distributing will effect any Debt-for-Equity Exchange within b days of the
   Distribution; should Distributing continue to own any Remainder Shares after
   such time, Distributing will sell the Remainder Shares as soon as practicable
   taking into account market and general economic conditions and sound
   business judgment, in no event later than g years after the Distribution.

8. Distributing will vote, or cause to be voted, any Remainder Shares in proportion
   to the votes cast by Controlled’s other shareholders, and Distributing may grant
   a proxy to Controlled to effectuate such voting.

9. Distributing will use an amount of cash (from its general accounts) equal to or
   greater than the amount of the Controlled Distributed Debt Proceeds to repay
   Distributing Debt, make distributions to Distributing shareholders, repurchase
   shares of Distributing stock and/or repay ordinary course liabilities.

10. Any Controlled Securities issued to Distributing in the Contribution will qualify
    as “securities” within the meaning of section 361(a).

                                      Rulings
    

Based solely on the information and representations submitted, we rule as follows
regarding the Proposed Transaction:

1. The Contribution, together with the Distribution (and any Clean-Up Spin or Clean-Up
   Split), will be a “reorganization” within the meaning of section 368(a)(1)(D).
   Distributing and Controlled will each be a “party to a reorganization” within the
   meaning of section 368(b).

2. Distributing will recognize no gain or loss on the Contribution. Sections 361(a),
   361(b), and 357(a).

3. Controlled will recognize no gain or loss on the Contribution. Section 1032(a).

4. Controlled’s basis in each asset received from Distributing in the Contribution
   will be the same as the basis of the asset in the hands of Distributing
   immediately before the Contribution. Section 362(b).

5. Controlled’s holding period for each asset received in the Contribution will
   include the period during which Distributing held such asset. Section 1223(2).

6. Distributing shareholders will recognize no gain or loss (and no amount will be
   includible in income) upon the receipt of Controlled stock in the Distribution or
   PLR-108911-21 12

   any Clean-Up Spin or Clean-Up Split under section 355(a).

7. Distributing will recognize no gain or loss upon the Distribution or any Clean-Up
   Spin or Clean-Up Split. Section 361(c).

8. The Controlled Distributed Debt Proceeds and any Controlled Securities will be
   treated as being distributed pursuant to the plan of reorganization for purposes
   of sections 361(b)(1)(A) and 361(b)(3).

9. Distributing will recognize no gain or loss on any Debt Exchanges, other than
   any (i) deductions attributable to the fact that the Distributing Debt may be
   redeemed at a premium, (ii) income attributable to the fact that the Distributing
   Debt may be redeemed at a discount, and (iii) interest expense accrued with
   respect to the Distributing Debt. Section 361(c).

10. The aggregate basis of the Distributing common stock and the Controlled stock
    in the hands of Distributing’s public shareholders immediately after the
    Distribution or the Clean-up Spin, if applicable, (including any fractional share
    interest in Controlled stock to which a shareholder may be entitled) will be the
    same as the aggregate basis of the Distributing common stock held by
    Distributing’s public shareholders immediately before the Distribution or
    Clean-up Spin, allocated between Distributing stock and Controlled stock in
    proportion to the fair market value of each in accordance with Treas. Reg.
    §1.358-2(a)(2). Section 358(a) through (c). If a Clean-up Split is undertaken, the
    aggregate basis of Controlled stock received by each of Distributing’s public
    shareholders in the Clean-up Split (including any fractional share interest in
    Controlled stock to which a shareholder may be entitled) will be the same as
    such public shareholder’s aggregate basis in the Distributing common stock
    surrendered and will be allocated among the shares received in accordance
    with Treas. Reg. §1.358-2(a)(2). Section 358(a) and (b).

11. If a holder of Distributing common stock that purchased or acquired shares on
    different dates or at different prices is not able to identify which particular share
    of Controlled stock is received as a distribution with respect to, or in exchange
    for, a particular share of Distributing common stock, the holder may designate
    which particular share of Controlled stock is received as a distribution with
    respect to, or in exchange for, a particular share of Distributing common stock,
    provided the designation is consistent with the terms of the Distribution, Clean-
    Up Spin or Clean-Up Split. Treas. Reg. §1.358-2(a)(2)(vii).

12. The holding period of the Controlled stock received by the Distributing public
    shareholders in the Distribution, Clean-up Spin or Clean-up Split (including any
    fractional share interest in Controlled stock to which public shareholders may
    be entitled) will include the holding period of the Distributing common stock with
    respect to which the distribution of Controlled stock will be made in the case of
    the Distribution or a Clean-up Spin or which is surrendered in the exchange in
    PLR-108911-21 13

    the case of a Clean-Up Split, provided that the Distributing common stock is
    held as a capital asset on the date of the distribution. Section 1223(1).

13. Earnings and profits will be allocated between Distributing and Controlled in
    accordance with section 312(h) and Treas. Reg. §§1.312-10(a) and
    1.1502-33(e).

14. Distributing’s continuing ownership of any Remainder Shares until disposition
    within g years after the Distribution will not adversely impact the qualification of
    the Distribution under sections 355 and 368(a)(1)(D) and will not be in
    pursuance of a plan having as one of its principal purposes the avoidance of
    U.S. federal income tax for purposes of section 355(a)(1)(D)(ii).

15. Any payments made between any of Distributing and Controlled and their
    respective affiliates under any of the Continuing Arrangements regarding
    liabilities, indemnities, or other obligations that (i) have arisen or will arise for a
    taxable period ending on or before the Distribution or for a taxable year
    beginning before and ending after the Distribution and (ii) will not become fixed
    and ascertainable until after the Distribution will be characterized in a manner
    consistent with the proper treatment if such payments or transfers had occurred
    immediately before the Distribution pursuant to the Distribution. See Arrowsmith
    v. Commissioner, 344 U.S. 6 (1952) and Revenue Ruling 83-73, 1983-1 C.B.
    84.

16. The receipt by Distributing public shareholders of cash in lieu of fractional
    shares, if any, of Controlled stock will be treated for U.S. federal income tax
    purposes as if the fractional shares had been distributed to the Distributing
    public shareholders as part of the 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 10), if any, will be treated as capital gain (or loss) under
    section 1001, provided the stock was held as a capital asset by the selling
    shareholder. Such gain (or loss) will be short-term or long-term capital gain (or
    loss) determined using the holding period provided in Ruling 12.

17. Following the Distribution, Controlled will not be a successor of Distributing for
    purposes of section 1504(a)(3). Therefore, Controlled and its direct and indirect
    subsidiaries that are “includible corporations” under section 1504(b) and satisfy
    the ownership requirements of section 1504(a)(4) will be members of an
    affiliated group of corporations eligible to file a consolidated U.S. federal income
    tax return with Controlled as the common parent.

                                      Caveats
    

No opinion is expressed about the tax treatment of the Proposed Transaction under
other provisions of the Code or regulations or the tax treatment of any conditions
PLR-108911-21 14

existing at the time of, or effects resulting from, the Proposed Transaction that are not
specifically covered by the above rulings.

                                Procedural Matters

This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of the
Code provides that this letter may not be used or cited as precedent.

A copy of this letter must be attached to any 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 and control number of
this ruling letter.

Pursuant to the power of attorney on file in this matter, a copy of this letter is being
sent to your authorized representatives.

                                   Sincerely,



                                   Kelly E. Madigan__
                                   Kelly E. Madigan
                                   Assistant to the Branch Chief, Branch 1
                                   Office of Chief Counsel (Corporate)

cc: