PLR 200843024: Subsidiary and REIT liquidations and reincorporations received tax-free treatment
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This page covers one taxpayer's ruling, issued in 2008, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.
Plain-English summary
A public corporate group proposed a multi-step restructuring involving a subsidiary, three subsidiary REITs, disregarded limited liability companies, and a newly formed REIT. One subsidiary would merge into a disregarded entity, the subsidiary REITs would liquidate into another disregarded entity, and assets would then move through two corporate-classification transactions. Based on extensive ownership, solvency, liability, continuity, and nonavoidance representations, the IRS approved nonrecognition treatment for the parent and liquidating subsidiaries under §§ 332 and 337. The parent received carryover bases, tacked holding periods, tax-attribute succession, and the required REIT liquidation dividend treatment. The two reincorporations qualified under § 351, with no gain to the transferors or new corporations and with the specified basis and holding-period consequences. The ruling did not decide whether any represented REIT actually qualified as a REIT.
Ruling snapshot
- Question: What tax consequences followed the proposed subsidiary and REIT liquidations and two reincorporations?
- Outcome: Approved. The liquidations and § 351 transfers generally received nonrecognition, carryover-basis, holding-period, and attribute-succession treatment.
- Key authorities: IRC §§ 332, 334, 337, 351, 357, 362, 381, 1032, 1223; Treas. Reg. § 301.7701-3(g)(1)(iv)
Full text (IRS public release)
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Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 200843024 Third Party Communication: None
Release Date: 10/24/2008 Date of Communication: Not Applicable
Person To Contact:
Index Numbers: 332.00-00, 337.00-00, ---------------------, ID No. -------------
Telephone Number:
351.00-00
---------------------
Refer Reply To:
-------------- CC:CORP:B04
----------------------------- PLR-118756-08
-------------------------------- Date:
--------------------------------------------- July 16, 2008
LEGEND:
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Newco ----------------------------------------------------------------------------------------------------
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LLC 1 ----------------------------------------------------------------------------------------------------
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LLC 3 ----------------------------------------------------------------------------------------------------
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LLC 4 ----------------------------------------------------------------------------------------------------
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Date 1 ---------------------
Date 2 -----------------------
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Dear ------------:
This letter responds to your April 21, 2008 request for rulings on the federal
income tax consequences of a series of partially completed and proposed transactions
described below. The information provided in that request and in later correspondence
is summarized below.
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The rulings contained in this letter are based upon facts 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 material
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.
Summary of Facts
Parent is a widely held, publicly traded corporation, and is the common parent of
an affiliated group whose includible corporations join in filing a consolidated federal
income tax return. Parent wholly owns Sub 1 and Sub 1 wholly owns Sub 2. Sub 2
also owns all the membership interests in LLC 1, an entity intended to be disregarded
as separate from Sub 2 for federal income tax purposes under § 301.7701-3 of the
Procedure and Administration Regulations (a “disregarded entity”). Through LLC 1,
Sub 2 owns all the common stock of Sub 3, a corporation that has elected to be taxable
as a real estate investment trust (“REIT”) for federal income tax purposes, and a
percent of the common stock of Sub 4, a REIT. Sub 2 also owns all the common stock
of Sub 5, a REIT. Sub 3 owns b percent of the common stock of Sub 4. (Collectively,
Sub 3, Sub 4 and Sub 5 are referred to as the “Sub REITs” and each is separately
referred to as a “Sub REIT”). Sub 4 also owns all the common interests in LLC 2, a
limited liability company that is treated as a partnership for federal income tax purposes.
Each of the Sub REITs has preferred stock of nominal value outstanding intending to
meet the requirements of § 856(a). Additionally, Sub 5 has two additional classes of
preferred stock outstanding. One class is owned by Sub 2 (through LLC 4) and the
other class is owned by Sub 1.
Proposed Transaction
Parent has completed Step (i) (below) and proposes to undertake the remaining
steps (collectively, the “Proposed Transaction”):
(i) On Date 1, Sub 2 (through LLC 1) contributed cash to Sub 3. Sub 3 used
this cash in addition to cash it had on hand to repay debt owed to Sub 1.
(ii) Sub 1 will form LLC 3, an entity intended to be disregarded from Sub 1.
Pursuant to state law, Sub 2 will merge with and into LLC 3 (the “First
Liquidation”).
(iii) LLC 1 will form a new REIT (“Newco”) with nominal capital.
(iv) Pursuant to state law, each of the Sub REITs will merge with and into LLC 1,
with LLC 1 as the surviving entity (the “Sub 3 Liquidation,” the “Sub 4
Liquidation,” and the “Sub 5 Liquidation,” respectively). (Collectively, the Sub
3 Liquidation, the Sub 4 Liquidation and the Sub 5 Liquidation are the
“Second Liquidations.”) Simultaneously with the Second Liquidations, all the
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preferred stock of each of the Sub REITs will be retired in exchange for cash
of equivalent value.
(v) LLC 1 will make a legal distribution to LLC 3 of all of the assets and liabilities
received in the Second Liquidations except for the common interests in
LLC 2.
(vi) LLC 1 will make an election to be treated as an association taxable as a
corporation for federal income tax purposes (the “First Reincorporation”).
Following the First Reincorporation, LLC 1 is referred to as “New LLC 1.”
(vii) New LLC 1 will transfer all its interests in LLC 2 to Newco solely in exchange
for all the stock of Newco (the “Second Reincorporation”).
(viii) LLC 3 will legally dissolve into Sub 1.
(ix) To satisfy the 100 shareholder requirement of § 856(a)(5), at some time prior
to Date 2, Newco will issue preferred stock to investors in exchange for cash.
Representations
The First Liquidation
Parent makes the following representations regarding the First Liquidation:
(a1) Sub 1, on the date of adoption of the plan of merger, and at all times until the
final liquidating distribution is completed, will be the owner of at least 80
percent of the total combined voting power of all classes of stock of Sub 2
entitled to vote and the owner of at least 80 percent of the total value of all
classes of Sub 2 stock (excluding nonvoting stock that is limited and preferred
as to dividends and otherwise meets the requirements of § 1504(a)(4)).
(b1) No shares of Sub 2 stock will have been redeemed during the three years
preceding the adoption of the plan of merger of Sub 2.
(c1) All distributions from Sub 2 to Sub 1 pursuant to the plan of merger will be
made within a single taxable year of Sub 2.
(d1) As soon as the first liquidating distribution has been made, Sub 2 will cease to
be a going concern and its activities will be limited to winding up its affairs,
paying its debts, and distributing its remaining assets to its shareholders.
(e1) Sub 2 will retain no assets following the First Liquidation.
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(f1) Sub 2 will not have acquired assets in any nontaxable transaction as part of
the merger plan.
(g1) No assets of Sub 2 have been, or will be, disposed of by either Sub 2 or Sub
1 except for dispositions in the ordinary course of business and dispositions
occurring more than three years prior to adoption of the plan of merger.
(h1) The First Liquidation will not be preceded or followed by the reincorporation
in, or transfer or sale to, a recipient corporation (“Recipient”) of any of the
businesses or assets of Sub 2, if persons holding, directly or indirectly, more
than 20 percent in value of the Sub 2 stock also hold, directly or indirectly,
more than 20 percent in value of the stock in Recipient. For purposes of this
representation, ownership will be determined by application of the
constructive ownership rules of § 318(a) as modified by § 304(c)(3).
(i1) Before adoption of the merger plan, no assets of Sub 2 will have been
distributed in kind, transferred, or sold to Sub 1, except for (i) transactions
occurring in the normal course of business and (ii) transactions occurring
more than three years before adoption of the merger plan.
(j1) Sub 2 will report all earned income represented by assets that will be
distributed to Sub 1 such as receivables being reported on a cash basis,
unfinished construction contracts, commissions due, dividends, etc.
(k1) The fair market value of the assets of Sub 2 will exceed its liabilities both at
the date of the adoption of the plan of merger and immediately before the Sub
2 Liquidation. The total fair market value of the assets of Sub 2 transferred to
Sub 1 by Sub 2 will exceed the sum of (i) the amount of liabilities assumed by
Sub 1 and (ii) the amount of liabilities owed to Sub 1.
(l1) There is no intercorporate debt existing between Sub 1 and Sub 2 that was
issued, acquired, or will be settled at a discount, and none has been
cancelled, forgiven, or discounted, except for transactions that occurred more
than three years before the date of adoption of the merger plan.
(m1) Sub 1 is not an organization that is exempt from federal income tax under
§ 501 or any other provision of the Code.
(n1) All other transactions undertaken contemporaneously with, in anticipation of,
in conjunction with, or in any way related to the First Liquidation have been
fully disclosed.
(o1) Sub2 is neither a regulated investment company nor a real estate investment
trust subject to § 332(c).
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The Second Liquidations
Parent makes the following representations regarding the Second Liquidations:
(a2) Sub 1, on the date of adoption of the plan of merger, and at all times until the
final liquidating distribution is completed, will be the owner of at least 80
percent of the total combined voting power of all classes of stock entitled to
vote and the owner of at least 80 percent of the total value of all classes of
each Sub REIT (excluding nonvoting stock that is limited and preferred as to
dividends and otherwise meets the requirements of § 1504(a)(4)).
(b2) No shares of any of the Sub REITs will have been redeemed pursuant to the
merger plan.
(c2) All distributions from each of the Sub REITs to Sub 1 pursuant to the plans of
merger will be made within a single taxable year of each of the Sub REITs.
(d2) As soon as the first liquidating distribution has been made, each Sub REIT
will cease to be a going concern and its activities will be limited to winding up
its affairs, paying its debts, and distributing its remaining assets to its
shareholders.
(e2) None of the Sub REITs will retain assets following the Second Liquidations.
(f2) None of the Sub REITs will have acquired assets in any nontaxable
transaction pursuant to the merger plan.
(g2) No assets of any of the Sub REITs have been or will be disposed of by either
the Sub REITs or Sub 1 except for dispositions in the ordinary course of
business and dispositions occurring more than three years before adoption of
the plan of merger.
(h2) Except for the First and Second Reincorporations, the Second Liquidations
will not be preceded or followed by the reincorporation in, or transfer or sale
to, a recipient corporation (“Recipient”) of any of the businesses or assets of
the Sub REITs, if persons holding, directly or indirectly, more than 20 percent
in value of any of the Sub REIT stock also hold, directly or indirectly, more
than 20 percent in value of the stock in Recipient. For purposes of this
representation, ownership will be determined by application of the
constructive ownership rules of § 318(a) as modified by § 304(c)(3).
(i2) Before adoption of the merger plans, no assets of any of the Sub REITs will
have been distributed in kind, transferred, or sold to Sub 1, except for (i)
transactions occurring in the normal course of business and (ii) transactions
PLR-118756-08 7
occurring more than three years before adoption of the merger plan. For
purposes of this representation, distributions of earnings to comply with
§ 857(a)(1) are treated as distributions in the ordinary course of business.
(j2) Each Sub REIT will report all earned income represented by assets that will
be distributed to Sub 1, such as receivables being reported on a cash basis,
unfinished construction contracts, commissions due, etc.
(k2) The fair market value of the assets of each Sub REIT will each exceed its
respective liabilities both at the date of the adoption of the plan of merger and
immediately before each of the Second Liquidations. The total fair market
value of the assets of each Sub REIT transferred to Sub 1 by each Sub REIT
will each exceed the sum of (i) the amount of liabilities assumed by Sub 1 and
(ii) the amount of liabilities owed to Sub 1.
(l2) There is no intercorporate indebtedness existing between Sub 1 and any of
the Sub REITs that was issued, acquired, or will be settled at a discount,
except for transactions that occurred more than three years before the date of
adoption of the merger plans.
(m2) Sub 1 is not an organization that is exempt from federal income tax under
§ 501 or any other provision of the Code.
(n2) The fair market value of the consideration received by Sub 1 and by the
minority shareholders for each share of Sub REIT stock will approximately
equal the fair market value of that stock.
(o2) The minority shareholders of each Sub REIT will receive cash of equivalent
value in exchange for their shares. Accordingly, none of the assets being
distributed to the minority shareholders (i) has a fair market value greater than
its basis in the hands of any of the Sub REITs, (ii) is an installment obligation,
(iii) is property described in the recapture provisions of the Code, or (iv) is
property for which any of the Sub REITs obtained a deduction.
(p2) All other transactions undertaken contemporaneously with, in anticipation of,
in conjunction with, or in any way related to, the Second Liquidations have
been fully disclosed.
The First Reincorporation
Parent makes the following representations regarding the First Reincorporation:
(a3) No stock or securities will be issued (or deemed issued) for services rendered
to or for the benefit of New LLC 1 in connection with the First Reincorporation.
PLR-118756-08 8
(b3) No stock or securities will be issued (or deemed issued) for indebtedness of
New LLC 1 that is not evidenced by a security or for interest on indebtedness
of New LLC 1 which accrued on or after the beginning of the holding period of
Sub 1 for the debt.
(c3) The First Reincorporation is not the result of the solicitation by a promoter,
broker, or investment house.
(d3) Sub 1 will not retain any rights in the property transferred to New LLC 1.
(e3) The value of the stock of New LLC 1 received in exchange for accounts
receivable will be equal to the net value of the accounts transferred (i.e., the
face amount of the accounts receivable previously included in income less the
amount of the reserve for bad debts).
(f3) The adjusted basis and the fair market value of the assets to be transferred
by Sub 1 to New LLC 1 will, in each instance, be equal to or exceed the sum
of the liabilities to be assumed by New LLC 1 (within the meaning of
§ 357(d)).
(g3) The liabilities of Sub 1 to be assumed (within the meaning of § 357(d)) by
New LLC 1 were incurred in the ordinary course of business and are
associated with the assets to be transferred.
(h3) There is no indebtedness between Sub 1 and New LLC 1 and there will be no
indebtedness created in favor of Sub 1 as a result of the First
Reincorporation.
(i3) The transfers and exchanges will occur under a plan agreed upon before the
First Reincorporation in which the rights of the parties are defined.
(j3) All exchanges will occur on approximately the same date.
(k3) There is no plan or intention on the part of New LLC 1 to redeem or otherwise
reacquire any of the stock of New LLC 1 that will be issued in the First
Reincorporation.
(l3) Taking into account any issuance of additional shares of New LLC 1 stock;
any issuance of stock for services; the exercise of any New LLC 1 stock
rights, warrants, or subscriptions; a public offering of New LLC 1; and the
sale, exchange, transfer by gift, or other disposition of any of the stock of New
LLC 1 to be received in the exchange, Sub 1 will be in “control” of New LLC 1
within the meaning of § 368(c).
PLR-118756-08 9
(m3) Sub 1 will receive stock of New LLC 1 with a value approximately equal to the
fair market value of the property transferred to New LLC 1. New LLC 1 will
not transfer any other property to Sub 1.
(n3) New LLC 1 will remain in existence and retain and use the property
transferred to it in a trade or business.
(o3) The fair market value of the transferred property will exceed the sum of the
amount of liabilities of Sub 1 that are assumed by New LLC 1 in connection
with the transfer. Sub 1 will not receive any property other than New LLC 1
stock in the First Reincorporation.
(p3) The fair market value of the assets of New LLC 1 will exceed the amount of
its liabilities immediately after the transfer.
(q3) Except for the formation of Newco, there is no plan or intention to dispose of
the transferred property other than in the normal course of business
operations.
(r3) New LLC 1 will not be an investment company within the meaning of
§ 351(e)(1) and § 1.351-1(c)(1)(ii).
(s3) Sub 1 is not under the jurisdiction of a court in a title 11 or similar case (within
the meaning of § 368(a)(3)(A)) and the stock of New LLC 1 received in the
exchange will not be used to satisfy the indebtedness of such debtor.
(t3) New LLC 1 will not be a “personal service corporation” within the meaning of
§ 269A.
(u3) Pursuant to § 362(e)(2), a timely election will be made to reduce the stock
basis in New LLC 1 to the fair market value of the assets transferred.
The Second Reincorporation
Parent makes the following representations regarding the Second Reincorporation:
(a4) No stock or securities will be issued (or deemed issued) for services rendered
to or for the benefit of Newco in connection with the Second Reincorporation.
(b4) No stock or securities will be issued (or deemed issued) for indebtedness of
Newco that is not evidenced by a security or for interest on indebtedness of
Newco which accrued on or after the beginning of the holding period of New
LLC 1 for the debt.
(c4) The Second Reincorporation is not the result of the solicitation by a promoter,
broker, or investment house.
PLR-118756-08 10
(d4) New LLC 1 will not retain any rights in the property transferred to Newco.
(e4) The value of the stock of Newco received in exchange for accounts
receivable will be equal to the net value of the accounts transferred, i.e., the
face amount of the accounts receivable previously included in income less the
amount of the reserve for bad debts.
(f4) The adjusted basis and the fair market value of the assets to be transferred
by New LLC 1 to Newco will, in each instance, be equal to or exceed the sum
of the liabilities to be assumed by Newco (within the meaning of § 357(d)).
(g4) The liabilities of New LLC 1 to be assumed (within the meaning of § 357(d))
by Newco were incurred in the ordinary course of business and are
associated with the assets to be transferred.
(h4) There is no indebtedness between New LLC 1 and Newco and there will be
no indebtedness created in favor of New LLC 1 as a result of the Second
Reincorporation.
(i4) The transfers and exchanges will occur under a plan agreed upon before the
Second Reincorporation in which the rights of the parties are defined.
(j4) All exchanges will occur on approximately the same date.
(k4) There is no plan or intention on the part of Newco to redeem or otherwise
reacquire any of stock issued in the Second Reincorporation.
(l4) Taking into account any issuance of additional shares of Newco stock; any
issuance of stock for services; the exercise of any Newco stock rights,
warrants, or subscriptions; a public offering of Newco; and the sale,
exchange, transfer by gift, or other disposition of any of the shares of Newco
stock to be received in the exchange, New LLC 1 will be in “control” of Newco
within the meaning of § 368(c).
(m4) The fair market value of the transferred property will exceed the sum of the
amount of liabilities of New LLC 1 that are assumed by Newco in connection
with the transfer.
(n4) The fair market value of the assets of Newco will exceed the amount of its
liabilities immediately after the transfer.
(o4) Newco will remain in existence and will use the assets transferred to it in a
business.
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(p4) There is no plan or intention by Newco to dispose of the transferred property
other than in the normal course of business operations.
(q4) Newco will not be an investment company within the meaning of § 351(e)(1)
and § 1.351-1(c)(1)(ii).
(r4) New LLC 1 is not and will not be under the jurisdiction of a court in a title 11
or similar case (within the meaning of § 368(a)(3)(A)) and the stock of Newco
received in the Second Reincorporation will not be used to satisfy the
indebtedness of such debtor.
(s4) Newco will not be a “personal service corporation” within the meaning of
§ 269A.
(t4) The assets transferred to Newco in the Second Reincorporation will not have
a net built-in gain as that term is defined in § 1.337(d)-7(b)(1).
(u4) Pursuant to § 362(e)(2), a timely election will be made to reduce the stock
basis in Newco to the fair market value of the assets transferred.
With respect to the Proposed Transaction
(a5) Sub 1 will pay all expenses associated with the Proposed Transaction.
Rulings
The First Liquidation
Based solely on the information submitted and the representations set forth
above, we rule as follows on the First Liquidation:
(1A) Sub 1 will not recognize any gain or loss upon the actual or constructive
receipt of the assets of Sub 2 and the assumption of Sub 2 liabilities
(§ 332(a)).
(2A) Sub 2 will not recognize any gain or loss on the distribution of its assets to,
and assumption of liabilities by, Sub 1 in the First Liquidation (§ 337(a)).
(3A) Sub 1’s basis in each asset received or deemed received from Sub 2 in the
First Liquidation will equal the basis of that asset in the hands of Sub 2
immediately before the First Liquidation (§ 334(b)(1)).
(4A) Sub 1’s holding period in each asset received or deemed received from Sub
2 in the First Liquidation will include the period during which that asset was
held by Sub 2 (§ 1223(2)).
PLR-118756-08 12
(5A) Sub 1 will succeed to and take into account the items of Sub 2 as described
in § 381(c). These items will be taken into account by Sub 1 subject to the
applicable conditions and limitations specified in §§ 381, 382, 383, and 384
and the regulations thereunder (§ 381(a) and § 1.381(a)-1).
(6A) Sub 1 will succeed to and take into account the earnings and profits or
deficit in earnings and profits of Sub 2 as of the date of the First Liquidation.
Any deficit in earnings and profits will be used only to offset earnings and
profits accumulated after the date of the First Liquidation (§ 381(c)(2)(A),
§§ 1.381(c)(2)-1 and 1.312-11(a)).
The Second Liquidations
Based solely on the information submitted and the representations set forth
above, we rule as follows on the Second Liquidations:
(1B) Sub 1 will not recognize any gain or loss upon the actual or constructive
receipt of the assets of the Sub REITs and the assumption of Sub REITs’
liabilities (§ 332(a)).
(2B) In accordance with § 332(c), Sub 1 shall recognize and treat as a dividend an
amount equal to the deduction for dividends paid allowable to each Sub REIT
by reason of the Second Liquidations.
(3B) The Sub REITs will not recognize any gain or loss on the distribution of
assets to, and assumption of liabilities by, Sub 1 in the Second Liquidations
(§ 337(a)).
(4B) Sub 1’s basis in each asset received or deemed received from the Sub REITs
in the Second Liquidations will equal the basis of that asset in the hands of
the Sub REITs immediately before the Second Liquidations (§ 334(b)(1)).
(5B) Sub 1’s holding period in each asset received or deemed received from the
Sub REITs in the Second Liquidations will include the period during which
that asset was held by Sub REITs (§ 1223(2)).
(6B) Sub 1 will succeed to and take into account the items of the Sub REITs as
described in § 381(c). These items will be taken into account by Sub 1
subject to the applicable conditions and limitations specified in §§ 381, 382,
383, and 384 and the regulations thereunder (§ 381(a) and § 1.381(a)-1).
(7B) Sub 1 will succeed to and take into account the earnings and profits or deficit
in earnings and profits of the Sub REITs as of the date of the Second
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Liquidations. Any deficit in earnings and profits will be used only to offset
earnings and profits accumulated after the date of the Second Liquidations
(§ 381(c)(2)(A), §§ 1.381(c)(2)-1 and 1.312-11(a)).
The First Reincorporation
Based solely on the information submitted and the representations set forth above,
we rule as follows on the First Reincorporation:
(1C) The First Reincorporation will be treated as a transfer by Sub1 to New LLC 1
of all of the assets and liabilities of LLC 1 (remaining after step (v)) solely in
exchange for New LLC 1 stock (§ 301.7701-3(g)(1)(iv)).
(2C) Sub 1 will not recognize any gain or loss in the First Reincorporation
(§§ 351(a) and 357(a)).
(3C) New LLC 1 will not recognize any gain or loss in the First Reincorporation
(§ 1032(a)).
(4C) The basis in the New LLC 1 stock received by Sub 1 in the First
Reincorporation will not exceed the aggregate fair market value of the assets
transferred to New LLC 1 in the First Reincorporation (§ 362(e)(2)(C)).
(5C) The holding period of the New LLC 1 shares received by Sub 1 will include
the holding period of the assets transferred to New LLC 1, provided that such
transferred assets were capital assets on the date of the exchange
(§ 1223(1)).
(6C) The basis in each asset received by New LLC 1 in the First Reincorporation
will be the same as the basis in that asset in the hands of Sub 1 immediately
before the First Reincorporation (§ 362(a)).
(7C) The holding period of New LLC 1 of each asset received in the First
Reincorporation will include the holding period during which such asset was
held by Sub 1 (§ 1223(2)).
The Second Reincorporation
Based solely on the information submitted and the representations set forth above, we
rule as follows on the Second Reincorporation:
(1D) New LLC 1 will not recognize any gain or loss in the Second Reincorporation
(§§ 351(a) and 357(a); Rev. Rul. 77-449, 1977-2 C.B. 110).
PLR-118756-08 14
(2D) Newco will not recognize any gain or loss in the Second Reincorporation
(§ 1032(a)).
(3D) The basis in the Newco stock received by New LLC 1 in the Second
Reincorporation will not exceed the aggregate fair market value of the assets
transferred to Newco in the Second Reincorporation (§ 362(e)(2)(C)).
(4D) The holding period of the Newco shares received by New LLC 1 will include
the holding period of the assets transferred to Newco, provided that such
transferred assets were capital assets on the date of the exchange
(§ 1223(1)).
(5D) The basis in each asset received by Newco in the Second Reincorporation
will be the same as the basis in that asset in the hands of New LLC 1
immediately before the Second Reincorporation (§ 362(a)).
(6D) The holding period of Newco of each asset received in the Second
Reincorporation will include the holding period during which such asset was
held by New LLC 1 (§ 1223(2)).
Caveats
No opinion is expressed about the tax treatment of the transactions under other
provisions of the Code or regulations or on the tax treatment of any conditions existing
at the time of, or effects resulting from, the transactions that are not specifically covered
by the above rulings. In particular, no ruling is expressed regarding whether any entity
that is represented to be a REIT qualifies as a REIT under part II of subchapter M of
Chapter 1 of the Code.
Procedural Statements
This ruling 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 ruling letter must be attached to the federal income tax return of
each party involved in the Proposed Transaction for the taxable year in which the
Proposed Transaction is completed. Alternatively, taxpayers filing their returns
electronically may satisfy this requirement by attaching a statement to their return that
provides the date and control number of this ruling letter.
PLR-118756-08 15
In accordance with the power of attorney on file with this office, a copy of this
letter is being sent to your authorized representative.
Sincerely,
_Richard K. Passales__
Richard K. Passales,
Senior Counsel, Branch 4
Office of Associate Chief Counsel
(Corporate)
cc:
~~~
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