CCA 200911010: The direct asset recipient was the acquiring corporation under section 381

Plain-English summary

A corporation directly acquired assets in a section 368(a)(1)(D) reorganization, then transferred them through subsidiaries so that no single corporation ultimately held all the assets. The section 381 regulations allow only one acquiring corporation. When no corporation ultimately acquires all transferred assets, the corporation that directly acquired them is treated as the acquiring corporation even if it retains none. Chief Counsel concluded that the direct recipient was the section 381 acquiring corporation and retained all earnings and profits received from the acquired corporation.

Ruling snapshot

• Question: Which corporation was the section 381 acquiring corporation when the transferred assets ended up in multiple subsidiaries?
• Outcome: Advice given: the corporation that directly acquired the assets was the acquiring corporation and retained the received earnings and profits.
• Key authorities: IRC §§ 368(a)(1)(D) and 381(a)(2); Treas. Reg. § 1.381(a)-1(b)(2)(i).

Full text (IRS public release)

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ID: CCA_2008070814264452 Number: 200911010
Release Date: 3/13/2009
Office: ---------------------
UILC: 381.02-00

From: ---------------------
Sent: Tuesday, July 08, 2008 2:26:45 PM
To: --------------------
Cc: ---------------------------------------------
Subject: Acquiring corporation

------------- This email confirms our discussions concluding that -------------------------------------------------is the acquiring corporation for purposes of § 381 and retains all the earnings and profits received from the acquired corporation, -----------------------------------------. As we discussed, -------- acquired the assets of ----
------ in a § 368(a)(1)(D) reorganization. Pursuant to the plan of reorganization, -------- transferred all of the acquired assets to its subsidiary, which in turn transferred a portion of the acquired assets to its subsidiary (two tiers below --------). Accordingly, no one corporation ultimately held all the assets of ------.

Section 1.381(a)-1(b)(2)(i) provides that only a single corporation may be the acquiring corporation and provides that in a transaction to which § 381(a)(2) applies, the acquiring corporation is that corporation which pursuant to the plan of reorganization, ultimately acquires, directly or indirectly, all of the assets transferred by the transferor corporation. If in a transaction qualifying under § 381(a)(2), no one corporation ultimately acquires all of the assets transferred by the transferor corporation, that corporation which directly acquires the assets so transferred shall be the acquiring corporation for the purposes of § 381 and the regulations thereunder, even though such corporation ultimately retains none of the assets so transferred. Accordingly, under the facts above, -------- is the acquiring corporation for purposes of § 381, and thus, -------- retains all the earnings and profits received from the acquired corporation --------.

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