TAM 200036003: Intent behind later cash distributions matters in section 351 transfer

Plain-English summary

This short memorandum adds comments to a technical advice memorandum about a transfer of company assets to a subsidiary followed by cash distributions back to the transferor. It says the end result test under the step transaction doctrine is an appropriate way to decide whether the cash should be treated as taxable boot in the section 351 exchange. That test calls for examining whether the transferor actually intended, when it transferred the assets, that the subsidiary would later make the cash distributions. The released text gives no finding about that intent or final tax result; its additional comments on factual development and litigation hazards are absent from the public copy.

Ruling snapshot

• Question: Should later subsidiary cash distributions be treated as boot in the section 351 transfer?
• Outcome: Advice: apply the end result test and examine intent at the asset transfer date.
• Key authorities: IRC § 351; the step transaction doctrine.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

UIL: 0351.00-00
December 1, 1999
Number: 200036003
Release Date: 9/8/2000
TAM-107591-99/CC:DOM:CORP:1

MEMORANDUM FOR
Case Manager

FROM: Assistant Chief Counsel (Corporate)

SUBJECT: Technical Advice Memorandum (TAM-107591-99)

Taxpayer
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Subsidiary
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Company
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Date 1
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Date 4
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Month 7
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a
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d
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In a technical advice memorandum (“TAM”) issued by the Assistant Chief Counsel (Corporate), the Service concluded that the end result test under the step transaction doctrine is an appropriate test to determine whether to treat a series of cash distributions as taxable “boot” in a § 351 transaction. In the instant case, the end result test requires an examination of whether Taxpayer actually intended on Date 4, when Taxpayer transferred Company assets to Subsidiary, that Subsidiary would make the subsequent cash distributions to Taxpayer. We have the following additional comments with respect to the factual development and litigation hazards of the case.

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This internal memorandum is confidential and only for your information.
Neither a copy of this memorandum nor its contents should be released to or discussed with the taxpayer.