PLR 200029038: Supplement corrects a corporate separation ruling

Plain-English summary

The IRS supplemented an earlier private letter ruling about a corporate separation. It corrected descriptions of a disregarded entity, a year in the legend, and the stock that a parent would transfer to a controlled corporation. It also added a sentence to an earlier ruling about when a stock transfer would count as a disposition under the branch profits tax regulations. The IRS said the prior rulings otherwise remained in effect. This letter changes specified parts of the prior ruling and does not independently restate its full analysis.

Ruling snapshot

• Question: How should the earlier corporate separation ruling be corrected and supplemented?
• Outcome: Approved amendments to the specified facts and one ruling; other prior rulings retained.
• Key authorities: IRC §§ 355 and 884; Treas. Reg. § 1.884-2T(d)(5)(i).

Full text (IRS public release)

Internal Revenue Service        Department of the Treasury

Index Numbers:     0355.00-00   Washington, DC 20224
                  0368.04-00
                  0884.00-00    Person to Contact:
Number: 200029038
Release Date: 7/21/2000         Telephone Number:

                                Refer Reply To:
                                CC:DOM:CORP:3-PLR-100710-00
                                Date:
                                April 20, 2000




Shareholder                =


Parent                     =


Distributing               =



Controlled                 =

Disregarded Entity         =


                           =



Operating                  =



Merger Sub                 =

Country X                  =

State Y                    =

State Z                    =

Jurisdiction A             =

                                            -2-
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Year 1                       =

Year 2                       =

Date 1                       =

Date 2                       =

a                            =

b                            =

c                            =

d                            =

e                            =

f                            =

Dear

       This letter replies to a letter from your authorized representative dated December
22, 1999, requesting that we supplement our ruling letter dated December 9, 1999,
Control Number PLR-106450-99 (published as PLR 200010028) (“the Prior Ruling
Letter”). The Prior Ruling Letter concerned certain federal income tax consequences of
a corporate separation under § 355 of the Internal Revenue Code. All statements and
representations set forth in the Prior Ruling Letter are still valid except as set forth
below.

       The first line of page 3 of the Prior Ruling Letter should read “single-member
Jurisdiction A corporation” rather than “single-entity State A corporation”.

       The name of “Disregarded Entity” in the legend of the Prior Ruling letter should
be corrected to the name given to Disregarded Entity in the above legend.

       In light of the additional information submitted, the year supplied to “Year 2" in
the legend of the Prior Ruling Letter has been amended to the year given to “Year 2" in
the above legend.

         Paragraph (ix) on page 4 of the Prior Ruling Letter reads as follows:

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(ix)   Parent will transfer all of the shares of the Distributing Special Preferred Stock
       and a fixed percentage of the shares of Distributing new common stock to
       Controlled in exchange for additional shares of common stock of Controlled.

       Paragraph (ix) on page 4 should be amended to read as follows:

(ix)   Parent will transfer all of the shares of the Distributing Special Preferred Stock
       and a fixed percentage of the shares of Distributing common stock to Controlled
       in exchange for additional shares of common stock of Controlled.

       In the Prior Ruling Letter, ruling (10) on page 10 read as follows:

(10)   Provided that Controlled attaches a statement to its timely filed (including
       extensions) federal income tax return agreeing that Controlled will treat a
       disposition of part or all of the stock or securities of either           (or a
       successor-in-interest) or Disregarded Entity (or a successor-in-interest), as a
       “disposition” for purposes of § 1.884-2T(d)(5)(i), then Distributing’s transfer of the
                 stock to Controlled will not be treated as a “disposition” of
       stock under § 1.884-2T(d)(5)(i). If in the future             is liquidated into
       Controlled in a liquidation under § 332, such liquidation of              will be
       treated as a “disposition” for purposes of § 1.884-2T(d)(5)(i), notwithstanding
       § 1.884-2T(d)(5)(ii).

      This ruling should be amended by adding the following sentence at its
conclusion:

       This ruling is in lieu of and replaces Ruling 2 of the Date 2 Transaction Ruling,
       Control Number PLR-119706-98 (published as PLR 199941035), for transfers
       occurring after Distributing’s transfer of the          stock to Controlled.

       Other than ruling (10) which is modified as stated above, all of the rulings in the
Prior Ruling Letter remain in full force and effect.

       No opinion is expressed about the tax treatment of any of the transactions
described herein under other provisions of the Code and regulations, or about the tax
treatment of any conditions existing at the time of, or effects resulting from, the
transactions not specifically covered by the above ruling.

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

      Each affected taxpayer must attach a copy of this letter to the taxpayer's federal
income tax return for the tax year in which the transaction covered by this ruling letter is

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consummated.

      We are sending a copy of this letter to the authorized representative specified in
the power of attorney on file in this office.



                                         Sincerely yours,

                                         Assistant Chief Counsel (Corporate)




                                         By
                                         Ken Cohen
                                         Senior Technician Reviewer, Branch 3