PLR 200234050: IRS reaffirms spin-off ruling after revised stock issuance plans

Plain-English summary

A corporation asked the IRS to supplement an earlier ruling about its distribution of a controlled corporation's stock and related transactions. The earlier request described the controlled corporation's plans to issue equity after the distribution. The corporation revised that statement because of circumstances it had not anticipated when the distribution occurred. Based on the original and supplemental submissions, the IRS reaffirmed the earlier rulings and their caveats. This supplemental letter does not reproduce the earlier rulings or disclose the redacted issuance amounts and time periods.

Ruling snapshot

• Question: Does a revised plan for the controlled corporation's equity issuance change the earlier distribution ruling?
• Outcome: Approved: earlier rulings and caveats reaffirmed
• Key authorities: IRC § 355 (indexed subject); prior letter ruling PLR-130376-00

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury

Number: 200234050
Washington, DC 20224
Release Date: 8/23/2002
Index Number: 0355.01-00
Person to Contact:

Telephone Number:

Refer Reply To:
CC:CORP:4 PLR-126187-02
Date:
May 20, 2002

Dear

This responds to your May 7, 2002 request that we supplement our letter ruling dated April 10, 2001 (PLR-130376-00) (the “Prior Letter Ruling”). Capitalized terms not defined in this ruling have the meanings originally assigned them in the Prior Letter Ruling.

The Prior Letter Ruling addresses certain federal income tax consequences of
the distribution of stock of a controlled corporation (the “Distribution”) and related transactions. The Distribution was undertaken in part to improve Controlled’s ability to use its stock to acquire assets or cash or for other corporate purposes. The Prior Letter Ruling contains a statement provided by Distributing that within one year following the Distribution, Controlled intends to issue, subject to market conditions and business conditions, at least $ to $ of equity for cash or other assets, and, within years following the Distribution, and counting for this purpose any issuances of equity within the first year following the Distribution, Controlled intends to
issue at least $ to $ of equity for cash or other assets.

Due to circumstances not anticipated at the time of the Distribution, Distributing has amended the above statement to read as follows: Controlled represents that within years following the Distribution, Controlled intends to issue, subject to market and
business conditions, at least to $ of equity for cash or other assets, and, within years following the Distribution, and counting for this purpose any issuances of equity within the first years following the Distribution, Controlled intends to issue at least $ to $ of equity for cash or other assets.

Based on the information and representations submitted with the original and supplemental requests, we reaffirm the rulings and caveats set forth in the Prior Letter Ruling.

This supplement 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 taxpayer involved in the transaction should attach a copy of this supplemental letter to the taxpayer’s federal income tax return, as appropriate, for the 2

taxable year in which the transaction is consummated. Pursuant to a power of attorney on file in this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

Lewis K Brickates
Acting Branch Chief, Branch 4
Office of Associate Chief Counsel
(Corporate)

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