Tax-free spin-off of a business into a new public company, with debt-for-equity exchange

Plain-English summary

A publicly traded parent company that runs two lines of business wants to split off one of them (Business B) into a new, separately traded corporation ("Controlled") and hand that new company's stock to its own shareholders. This is a classic "spin-off." Through a multi-step plan, the parent contributes the Business B assets to Controlled in exchange for stock and cash from newly issued Controlled debt, then distributes the Controlled stock to shareholders. It also uses the cash and retained shares to pay down its own debt (a "creditor purge") and to exchange stock for debt held by investment banks (a "debt-for-equity exchange"). The IRS issued 20 rulings confirming the transaction qualifies as a tax-free reorganization under sections 368(a)(1)(D) and 355: the parent, the new company, and the shareholders generally recognize no gain or loss, with basis and holding periods carrying over. The IRS expressly did not rule on whether the spin-off has a valid business purpose. This is the standard IRS blessing that large corporate separations obtain before going forward.

Ruling snapshot

• Question: Do the contribution, distribution, and related debt steps qualify as a tax-free divisive reorganization under sections 355 and 368(a)(1)(D)?
• Outcome: approved
• Key authorities: IRC §§ 355, 368(a)(1)(D), 361, 357, 358, 362, 1032; Treas. Reg. §§ 1.355-2, 1.358-2

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 202451015                                             Third Party Communication: None
Release Date: 12/20/2024                                      Date of Communication: Not Applicable
Index Number: 355.00-00, 355.01-00,
              368.00-00, 368.04-00,                           Person To Contact:
              361.00-00, 361.02-02                            ------------------, ID No. -----------------
                                                              Telephone Number:
------------------------                                      --------------------
-------------------------------------                         Refer Reply To:
-----------------------------                                 CC:CORP:B01
--------------------                                          PLR-110107-24
---------------------------------------                       Date:
                                                              September 26, 2024




Distributing                          = --------------------------------------
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Controlled                            = -------------------------------------------
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Sub 1                                 = ----------------------------------
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Sub 2                                 = -------------------------------------
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Sub 3                                 = --------------------------------------------
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DRE 1                                 = -----------------------------------
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DRE 2                                 = --------------
PLR-110107-24                                2

                          -----------------------
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DRE 3                     = -------------------------------------------
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Business A                = ----------------------------

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

Date 1                    = ------------------

Date 2                    = ------------------

Date 3                    = ------------------

Date 4                    = ------------------------------------------------------------------------------
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Date 5                    = -------------

State A                   = -------------

a                         = ------

b                         = ------

c                         = ---

d                         = --

e                         = --

f                         = ---

Continuing Arrangements   = ------------------------------------------------------------------------------
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PLR-110107-24                                  3

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Transition Services          = ------------------------------------------------------------------------------
Agreements                   --------------------------------------------------------------------------------
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Controlled Equity Awards     = ------------------------------------------------------------------------------
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Debt-for-Equity Exchange     = ------------------------------------------------------------------------------
Agreement                    --------------------------------------------------------------------------------
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Distributing Equity Awards   = ------------------------------------------------------------------------------
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Equity Awards                = ----------------------------------------------------------------------------

Distributing Third Party     = ------------------------------------------------------------------------------
Debt                         --------------------------------------------------------------------------------
                             --------------------------------------

DRE 1 Bonds                  = ------------------------------------------------------------------------------
                             --------------------------------------------------
PLR-110107-24                                   4

 Sub 3 Third Party Debt       = ------------------------------------------------------------------------------
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 Historic Distributing Debt   = ------------------------------------------------------------------------------
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 Sub 1 Intercompany           = ------------------------------------------------------------------------------
 Receivables                  ----------------------------------------------------------------------

 Term Loan                    = ------------------------------------------------------------------------------
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 Sub 2 Assets                 = ------------------------------------------------------------------------------
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Dear ---------------:

This letter responds to your representatives’ letter dated May 30, 2024, on behalf of
Distributing, as supplemented by subsequent information and documentation, requesting
rulings on certain federal income tax consequences of a series of transactions (the
“Proposed Transactions”). The material information provided in that request and
subsequent correspondence is summarized below.

This letter is issued pursuant to Rev. Proc. 2024-1, 2024-1 I.R.B. 1, and 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 information 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.
PLR-110107-24                                 5

This office has made no determination regarding whether the Distribution (as defined
below) satisfies the business purpose requirement of Treas. Reg. §1.355-2(b).

                                    Summary of Facts

Distributing is a publicly traded domestic corporation and the common parent of a
consolidated group for federal income tax purposes (the “Distributing Group”).

Distributing wholly owns DRE 1 and DRE 2, each an entity disregarded as separate from
Distributing for federal income tax purposes (a “disregarded entity”).

DRE 2 wholly owns Sub 1, a State A corporation. DRE 2 also wholly owns DRE 3, a
disregarded entity. DRE 3 wholly owns Sub 2, a State A corporation.

On Date 1, Sub 3, a State A corporation wholly owned by Distributing, merged with and
into DRE 2 with DRE 2 surviving.

The Distributing Group currently conducts Business A and Business B. Business B is
conducted by Sub 1 and other subgroup entities.

As of Date 2, the Distributing Group, in relevant part, had outstanding: (a) Distributing
Third Party Debt including the DRE 1 Bonds, and (b) Sub 3 Third Party Debt (collectively,
the “Distributing Group Debt”). On Date 3, the Distributing Group refinanced a portion of
the Sub 3 Third Party Debt with a portion of the Term Loan. References to Historic
Distributing Debt include references to (i) the Term Loan and (ii) the DRE 1 Bonds.

For purposes of satisfying the active trade or business requirements of Section 355(b)
with respect to the Distribution, Distributing and members of its “separate affiliated group”
within the meaning of Section 355(b)(3) will rely on Business A, and Controlled and
members of its separate affiliated group will rely on Business B. Distributing has submitted
financial information in accordance with Rev. Proc. 2017-52 indicating that Business A
and Business B have had gross income and employee wages representing the active
conduct of a trade or business for each of the past five years.

                                 Proposed Transaction

For what are represented to be valid corporate business purposes, Distributing proposes
to undertake the following Proposed Transactions, the steps of which may occur in a
different order than described below, and some of the steps of which have already been
completed:

Step 1: Distributing forms Controlled, a State A corporation.

Step 2: Sub 1 changes its legal entity name.
PLR-110107-24                                 6

Step 3: Controlled issues bonds (the “Controlled Bonds”), if desired, and may deposit the
proceeds into an escrow account (the “Escrow Account”). Alternatively, or in addition,
Controlled may obtain a financing commitment with respect to one or more term loans
(collectively, the “Controlled Term Loan”) and revolving credit facilities (together with the
Controlled Term Loan, the “Bank Facilities”).
Step 4: Sub 2 transfers (i) Sub 2 Assets in one or more transactions to which Section
1001 applies and (ii) cash to Sub 1 in settlement of certain intercompany balances, if any.

Step 5: DRE 2 distributes all of the stock of Sub 1 and any other assets held by DRE 2
related to Business B, excluding any Sub 1 Intercompany Receivables to be repaid in
Step 10 below (collectively, the “Sub 1 Assets”) to Distributing.

Step 6: Distributing contributes (i) the Sub 1 Assets and (ii) certain assets held by
Distributing related to Business B (together with the Sub 1 Assets, the “Transferred
Assets”) to Controlled in exchange for additional Controlled common stock, the
assumption of liabilities, if any, associated with the Transferred Assets (the “Assumed
Liabilities”), and any cash received in Step 9 (the “Contribution”).

Step 7: Controlled (i) to the extent it deposited the proceeds from the Controlled Bonds
into the Escrow Account, receives the cash from the Escrow Account and/or (ii) draws
down on the Bank Facilities (collectively, the “Debt Proceeds”).

Step 8: Controlled contributes or lends all or a portion of the Debt Proceeds to Sub 1 in
an amount not in excess of the sum of the Sub 1 Intercompany Receivables and working
capital needs of Sub 1 and its subsidiaries, but not exceeding the aggregate issue price
of the Controlled Bonds and Bank Facilities.

Step 9: Controlled distributes any remaining Debt Proceeds to Distributing (the
“Distributed Debt Proceeds”).

Step 10: Sub 1 repays the Sub 1 Intercompany Receivables owed to DRE 2 in an amount
equal to the amount transferred to Sub 1 in Step 8 less any working capital needs (the
“Intercompany Debt Repayment Proceeds”). DRE 2 will not segregate or otherwise trace
the use of the Intercompany Debt Repayment Proceeds received in this Step 10. In
addition, to the extent Sub 1 holds receivables of other members of the Distributing
Group, Sub 1 may transfer such intercompany receivables to DRE 2 in repayment of
amounts due under the Sub 1 Intercompany Receivables.

Step 11: DRE 2 repays certain intercompany debt due to Distributing with the
Intercompany Debt Repayment Proceeds or distributes Intercompany Debt Repayment
Proceeds to Distributing. Distributing will not segregate or otherwise trace the use of the
Intercompany Debt Repayment Proceeds received in this Step 11.

Step 12: Distributing distributes at least a percent of the Controlled stock pro rata to its
shareholders (the “Distribution”). Distributing retains up to b percent of the Controlled
PLR-110107-24                                 7

stock (the “Remaining Shares”) for purposes of any Debt-for-Equity Exchange or Clean-
Up Distribution.

Step 13: Within c months following the Distribution, Distributing repays Historic
Distributing Debt, including principal, interest, premium (if any), and associated fees, in
an amount equal to the Distributed Debt Proceeds received in Step 9 (the “Creditor
Purge”) and not used to make a Shareholder Purge (as defined below) pursuant to Step

14. In addition, an amount equal to the Intercompany Debt Repayment Proceeds received
in Step 11 and not used to make Additional Shareholder Payments (as defined below)
pursuant to Step 14 will be used to repay all or a portion of any Historic Distributing Debt,
including principal, interest, premium (if any), and associated fees (the “Additional Debt
Repayments”).

Distributing will not segregate or otherwise trace the use of the Distributed Debt Proceeds
or the Intercompany Debt Repayment Proceeds.

Step 14: Within c months following the Distribution, Distributing makes payments to its
shareholders in the form of one or more cash distributions or repurchases of outstanding
Distributing shares, including potentially pursuant to one or more customary accelerated
share repurchase programs (“Shareholder Purge Share Repurchases”) in an amount
equal to any remaining Distributed Debt Proceeds (the “Shareholder Purge,” and together
with the Creditor Purge, the “Boot Purge”).

In addition, if the amount of Intercompany Debt Repayment Proceeds exceeds the
Historic Distributing Debt repaid out of Intercompany Debt Repayment Proceeds pursuant
to Step 13 above, Distributing will make payments equal to such excess to its
shareholders in the form of one or more cash distributions or repurchases of outstanding
Distributing shares, including potentially pursuant to one or more customary accelerated
share repurchase programs (the “Additional Shareholder Payments”).

Step 15: One or more investment banks (the “Intermediaries”) purchase Historic
Distributing Debt from parties unrelated to Distributing.

Step 16: No sooner than Date 4, Distributing enters into the Debt-for-Equity Exchange
Agreement pursuant to which Distributing will exchange some or all of the Remaining
Shares (the “Transferred Shares”) in satisfaction of the Historic Distributing Debt held by
the Intermediaries (such exchange, the “Debt-for-Equity Exchange”). Following the Debt-
for-Equity Exchange, the Intermediaries may sell some or all of the shares received in the
exchange to third party investors.

Step 17: Distributing distributes any Remaining Shares not exchanged in the Debt-for-
Equity Exchange via a pro rata distribution to Distributing’s shareholders (the “Clean-Up
Distribution”). During the period that Distributing holds any Remaining Shares,
Distributing intends to vote the Remaining Shares in proportion to the votes cast by
Controlled’s other shareholders.
PLR-110107-24                                  8


Term Loan

The Term Loan matures on Date 5. Under the terms of the Term Loan, the Term Loan
must be repaid within d business days following the Distribution.

If a Debt-for-Equity Exchange is anticipated at the time of the Distribution, then
Distributing expects to seek an extension of the Term Loan prior to the repayment date.

Continuing Arrangements

In connection with the Proposed Transaction, Distributing and Controlled (or their
respective affiliates) will enter into certain Continuing Arrangements and Transition
Services Agreements. The Transition Services Agreements will last no longer than e
years. In addition, Controlled may issue Controlled Equity Awards, including pursuant to
the conversion of Distributing Equity Awards.

Share Repurchases

Following the Proposed Transaction, Controlled may institute a share repurchase
program, and Distributing will continue its share repurchase program (“Post Transaction
Repurchase Program” and together with Shareholder Purge Share Repurchases, the
“Share Repurchases”).

                                     Representations

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

Except as set forth below, Distributing has made all the representations in Section 3 of
the Appendix to Rev. Proc. 2017-52.

Distributing has not made the following representations, which do not apply to the
Proposed Transaction: 7, 20, 24, 25, 39, and 40.

Distributing has made the following alternative representations: 3(a), 22(a), 31(a), and
41(a).

Distributing has made the following modified representations:

Representation 2: In the Distribution, Distributing will distribute to its shareholders on the
same day at least a% of the stock of Controlled outstanding immediately before the
Distribution (determined without regard to any Controlled Equity Awards or any Controlled
shares underlying, or issued following the Distribution pursuant to, any Controlled Equity
Awards).
PLR-110107-24                                   9

Representation 5: Other than the Remaining Shares transferred in the Debt-for-Equity
Exchange and the Distributed Debt Proceeds transferred in the Creditor Purge, 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
(e.g., as a creditor or employee).

Representation 8(b): Distributing may have securities outstanding, but it will not distribute
Controlled stock, Controlled securities, or other property to any holder of such securities
in the Proposed Transaction, in satisfaction thereof, except potentially in satisfaction of a
portion of the Historic Distributing Debt pursuant to the Debt-for-Equity Exchange or
Creditor Purge, if any.

Representation 11(a): Following the Distribution, Distributing or the Distributing SAG and
Controlled or the Controlled SAG each will continue, independently and with its separate
employees, the active conduct of the business on which it relies to meet the active trade
or business requirement of Section 355(b), except with respect to activities performed
pursuant to the Continuing Arrangements and Transition Services Agreements.

Representation 14: Immediately after the Distribution, the fair market value of the
business assets of each of Distributing and Controlled will be greater than 80% of the fair
market value of its total assets. For this purpose, the term “business assets” of a
corporation means its gross assets used in one or more businesses and all members of
such corporation's separate affiliated group, within the meaning of Section 355(b)(3)(B),
are treated as one corporation. Such assets include cash and cash equivalents held as a
reasonable amount of working capital for one or more businesses. Such assets also
include assets required (by binding commitment or legal requirement) to be held to
provide for exigencies related to a business or for regulatory purposes with respect to a
business.

Representation 15:
  a) To the knowledge of Distributing’s management, there is no plan or intention by
      the shareholders or security holders of Distributing to sell, exchange, transfer by
      gift, or otherwise dispose of any of their stock in, or securities of, either Distributing
      or Controlled after the transaction, other than (i) through the public trading of their
      stock on an established market, (ii) sales by the distribution agent in the
      Distribution of aggregated fractional shares that Distributing’s shareholders would
      otherwise be entitled to receive, (iii) sales or other dispositions in connection with
      the Debt-for-Equity Exchange, and (iv) a disposition or purchase of Distributing or
      Controlled stock by any institutional investor or any shareholder who owns five
      percent or more of the stock of Distributing or Controlled in the normal course of
      its business based upon market conditions and investment needs in existence at
      that time.

   b) There is no plan or intention by Distributing or Controlled, directly or through any
      related person (within the meaning of Section 267(b) or Section 707(b)(1)), to
PLR-110107-24                                 10

       purchase any of its outstanding stock after the transaction, other than through
       stock purchases meeting the requirements of section 4.05(1)(b) of Rev. Proc. 96-
       30.

   c) There is no plan or intention to liquidate either Distributing or Controlled, to merge
      either corporation with any other corporation, or to sell or otherwise dispose of the
      assets of either corporation after the transaction, except (i) in the ordinary course
      of business or (ii) sales and other dispositions of assets to members of each
      corporation's separate affiliated group, within the meaning of Section 355(b)(3)(B).

Representation 29: There was no agreement, understanding, arrangement, or substantial
negotiations at any point during the two-year period ending on the date of the distribution
regarding an acquisition of more than f% of either Distributing or Controlled (including a
predecessor or successor within the meaning of Treas. Reg. §1.355-8) or a similar
acquisition, except for negotiations that have otherwise terminated.

Representation 32: No intercorporate debt will exist between Distributing and Controlled
at the time of, or subsequent to, the Distribution of Controlled stock, except for any debt
arising under the Continuing Arrangements and Transition Services Agreements and/or
ordinary course payables and receivables.

Representation 34: Except as described in connection with the Continuing Arrangements
and Transition Services Agreements, Distributing and Controlled each will pay its own
expenses, if any, incurred in connection with the Distribution.

Representation 35: The payment of cash in lieu of fractional shares of Controlled 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 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
Controlled stock in multiple accounts or with multiple brokers).

Representation 37: There is no net loss subject to Treas. Reg. §1.1502-13 that will be
taken into account as a result of a transaction related to the Distribution.

Representation 46: Other than any issuance of the Controlled Bonds or the Bank
Facilities, 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 of
Rev. Proc. 2018-53.

Distributing has made the following modified representations:
PLR-110107-24                                   11

Representation 1: For federal income tax purposes, Distributing is in substance the
obligor of any Assumed Liabilities constituting Distributing Debt that will be assumed in
the Contribution and Historic Distributing Debt that will be satisfied in the Creditor Purge
or Debt-for-Equity Exchange.

Representation 3: The holder of any Assumed Liabilities constituting Distributing Debt
that will be assumed in the Contribution and the Historic Distributing Debt that will be
satisfied in the Debt-for-Equity Exchange or Creditor Purge will not hold the debt for the
benefit of Distributing, Controlled, or any Related Person.

None of Distributing, Controlled, or any Related Person will participate in any profit gained
by the Intermediaries upon an exchange of Section 361 Consideration; nor will any such
profit be limited by agreement or other arrangement with Distributing or Controlled, except
as otherwise provided pursuant to the Debt-for-Equity Exchange Agreement.

The value of the Section 361 Consideration received by the Intermediaries in satisfaction
of the Historic Distributing Debt will not exceed the amount to which the holder is entitled
under the terms of the Historic Distributing Debt, except as otherwise provided pursuant
to the Debt-for-Equity Exchange Agreement.

Representation 4: Except with regard to the Term Loan or Assumed Liabilities that were
incurred in the ordinary course of business, Sub 3 or Distributing (or DRE 1) incurred the
Historic Distributing Debt for federal income tax purposes that will be assumed in Step 6,
repaid in Step 13, or exchanged in Step 16 (a) before the request for any relevant ruling
is submitted and (b) no later than 60 days before the earliest of the following dates: (i) the
date of the first public announcement (as defined in Treas. Reg. §1.355-7(h)(10)) of the
divisive reorganization or a similar transaction, (ii) the date of the entry by Distributing into
a binding agreement to engage in the divisive reorganization or a similar transaction, and
(iii) the date of approval of the divisive reorganization or a similar transaction by the board
of directors of Distributing.

Representation 6: There are one or more substantial business reasons for any delay in
satisfying Historic Distributing Debt with Section 361 Consideration beyond 30 days after
the Distribution. All the Historic Distributing Debt that will be satisfied with Section 361
Consideration will be satisfied as soon as practicable following the Distribution and, in
any event, no later than c months after the Distribution.

Representation 7: Distributing will not replace any Assumed Liabilities constituting
Distributing Debt that will be assumed in the Contribution and Historic Distributing Debt
that will be satisfied in the Creditor Purge or Debt-for-Equity Exchange with previously
committed borrowing, other than borrowing in the ordinary course of business pursuant
to a revolving credit agreement or similar arrangement.

Distributing has made the following additional representations:
PLR-110107-24                                 12

        1. If the term of the Term Loan is extended (in whole or in part), Distributing will not
      treat the refinanced Term Loan (or any portion thereof) as Historic Distributing Debt
      unless such extension does not result in a deemed exchange of the Term Loan (or
      any portion thereof) under Treas. Reg. §1.1001-3(a).

        2. The Share Repurchases were or will be motivated by a corporate business
      purpose, were or will be made with respect to widely held shares, and were not or
      will not be motivated by a desire to increase or decrease the ownership percentage
      of any particular shareholder or group of shareholders.

        3. At the time that a Share Repurchase was or will be consummated, the relevant
      issuing corporation did not or will not know the identity of any beneficial
      shareholder (i) from which the stock is repurchased in the open market; (ii) in the
      case of an accelerated share repurchase program, from which the third-party
      investment bank borrows such stock or purchases such stock to fulfill the bank's
      obligation to return borrowed shares; or (iii) that participates in a tender offer
      (except to the extent that the shareholder is the record holder of the tendered
      shares or provides an identifying tax-related form or statement to the issuer in
      connection with such participation).

                                         Rulings

Based solely on the information submitted and the representations set forth above, we
rule as follows:

        1. The Contribution, together with the Distribution, will be a “reorganization” within the
      meaning of Section 368(a)(1)(D) and Section 355. 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. Section 361 and
      Section 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’s 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 any
      Clean-Up Distribution under Section 355(a).
PLR-110107-24                                13

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

    8. For purposes of Section 361(b) and Section 361(c), the Intercompany Debt
     Repayment Proceeds will be treated as received by Distributing as Distributed
     Debt Proceeds in Step 9. The Sub 1 Intercompany Receivables owed to DRE 2
     will be treated as Transferred Assets received by Controlled in the Contribution.

    9. The Boot Purge will be treated as being distributed pursuant to the plan of
     reorganization. Sections 361(b)(1) and (b)(3).

    10. Distributing will recognize no gain or loss, or deductions or items of income, on the
      Debt-for-Equity Exchange other than (i) deductions attributable to the fact that the
      Historic Distributing Debt may be redeemed at a premium, (ii) income attributable
      to the fact that the Historic Distributing Debt may be redeemed at a discount, and
      (iii) interest expense accrued with respect to the Historic Distributing Debt. Section
      361(c).

    11. The aggregate basis of the Distributing common stock and the Controlled stock in
      the hands of Distributing's shareholders immediately after the Distribution or any
      Clean-Up Distribution (including any fractional share interest in Controlled stock to
      which a shareholder may be entitled) will equal the aggregate basis of the
      Distributing common stock held by such Distributing shareholder immediately
      before the Distribution or Clean-Up Distribution, respectively, 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).

    12. The holding period of the Controlled stock received by each Distributing
      shareholder in the Distribution (including any fractional share interest in Controlled
      stock to which 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, 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), Treas. Reg. §1.312-10(a), and Treas. Reg.
      §1.1502-33(e).
    14. The receipt by Distributing shareholders of cash in lieu of fractional shares, if any,
      of Controlled stock will be treated for federal income tax purposes as if the
      fractional shares had been distributed to the Distributing 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 11), 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-
PLR-110107-24                                14

     term or long-term capital gain (or loss) determined using the holding period
     provided in Ruling 12.

    15. 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 federal income tax return with
      Controlled as the common parent.

    16. Equity Awards currently outstanding and any Equity Awards issued in connection
      with or after the Distribution (and any Controlled shares underlying, or issued
      following the Distribution pursuant to, any such Equity Awards) will not be taken
      into account (i.e., will not be included in the numerator or the denominator) for
      purposes of determining whether Distributing distributed an amount of Controlled
      stock constituting control under Section 368(c).

    17. 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
      355(e), such Share Repurchases will be treated as being made from all public
      shareholders (defined as any 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 or Controlled, 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.

    18. Any increase, directly or indirectly, in the percentage of either voting power or value
      of the stock of Distributing or Controlled (as applicable) owned by a shareholder
      by virtue of the Share Repurchases or acquisitions of the stock of Distributing or
      Controlled, if any, as part of a plan (or series of related transactions) with the
      Distribution will be taken into account for purposes of Section 355(e) only after
      reducing such increase for any reduction in such percentage interest, directly or
      indirectly, resulting from the Share Repurchases and any disposition of stock in
      the applicable corporation by such shareholder or issuance of stock by Distributing
      or Controlled (as applicable), if any, as part of a plan (or series of related
      transactions) with the Distribution.
    19. The effect of the Share Repurchases will be taken into account under Section
      355(e) and these rulings only to the extent such Share Repurchases are otherwise
      treated for purposes of Section 355(e) as part of a plan (or series of related
      transactions) with the Distribution.

    20. For purposes of Section 355(e), the sale of fractional shares of Controlled common
      stock in connection with the Distribution will not be treated as an acquisition that is
      part of a plan (or series of related transactions) that includes the Distribution.
PLR-110107-24                                15

                                         Caveats

Except as expressly provided herein, no opinion is expressed or implied as to the tax
consequences of any aspect of any transaction or item discussed or referenced in 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 must be attached to any income tax return to which it is relevant.
Alternatively, a taxpayer filing its return electronically may satisfy this requirement by
attaching a statement to its return that provides the date on and control number of the
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,


                                      ___________________________________
                                      Kelton P. Frye
                                      Assistant to the Branch Chief, Branch 2
                                      Office of Associate Chief Counsel (Corporate)




cc:

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