PLR 200042014: Later restructuring leaves prior stock distribution rulings in force

Plain-English summary

Taxpayers asked the IRS to supplement earlier rulings about distributions of controlled company stock and related transactions. They proposed forming a new LLC that would elect corporate tax treatment, merging a subsidiary into it, and disposing of certain assets held by another LLC. The IRS ruled that these proposed steps would not adversely affect the earlier rulings, which would remain in full force. The letter does not restate those earlier rulings or give separate tax rulings on each proposed step.

Ruling snapshot

• Question: Would three later restructuring steps disturb the taxpayers' earlier stock distribution rulings?
• Outcome: Approved: the earlier rulings would remain in full force and effect.
• Key authorities: Prior IRS letter rulings PLR-121425-98 and PLR-107269-99; Treas. Reg. § 301.7701-3(b)(1).

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200042014
Washington, DC 20224
Release Date: 10/20/2000
Index Number: 0355.00-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:CORP:4 PLR-109312-00
Date:
July 20, 2000

Controlled A
=

Holdco A1
=

Holdco A2
=

Holdco A3
=

Contribution LLC I =

Sub E4
=

Sub E4 Newco
=

I Assets
=

This letter replies to your January 27, 2000 request that we further supplement our letter ruling dated March 30, 1999 (PLR-121425-98) (the "Original Letter Ruling"), as supplemented by our letter ruling dated April 28, 1999 (PLR-107269-99) (together, the "Prior Letter Rulings"). Capitalized terms not defined in this letter retain the meanings assigned them in the Original Letter Ruling.

The Prior Letter Rulings address certain federal income tax consequences of the distributions by Distributing 2 of the stock of Controlled A and Controlled B and related transactions.

Summary of Facts

Controlled A wholly owns Holdco A1. Holdco A1 wholly owns Holdco A2.
Holdco A2 wholly owns Contribution LLC I and Holdco A3. Contribution LLC I owns the I Assets. Holdco A3 wholly owns Sub E4.

Proposed Transactions

For good business reasons, Controlled A has proposed the following transactions:

(i) Holdco A3 will form a new wholly owned limited liability company ("Sub E4 Newco"). Sub E4 Newco will elect under § 301.7701-3(b)(1) of the Procedure and Administration Regulations to be treated as an association taxable as a corporation (effective at the date of its formation).

(ii) Sub E4 will merge with and into Sub E4 Newco.

(iii) Contribution LLC I will sell or otherwise dispose of the I Assets.

Ruling

Based on the information submitted with the original and supplemental ruling requests, we rule that the transactions described above in steps (i), (ii), and (iii) will not adversely affect any of the rulings contained in the Prior Letter Rulings, and the Prior Letter Rulings retain full force and effect.

Procedural Matters

This letter is directed only to the taxpayers who requested it. Section 6110(k)(3) 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 of each affected taxpayer for the tax year in which the transactions covered by this letter are completed.

Under a power of attorney on file in this office, a copy of this letter is being sent to each of your authorized representatives.

Sincerely,
Associate Chief Counsel
(Corporate)
By:_____
Wayne T. Murray
Senior Technician/Reviewer
Branch 4