PLR 200944011: Global restructuring with multiple spin-offs approved

Number

200944011

Outcome

Approved

Document type

Private Letter Ruling

IRS subject

Nonrecognition of Gain or Loss; Statutory Merger or Consolidation (Type A); Distributions of Property; Spin-Off; Assets for Control of Transferee (Type D)

Topics

Corporate transactions and reorganizations

Code sections

§ 301, § 304, § 318, § 332, § 336, § 337, § 354, § 355, § 357, § 358, § 361, § 362, § 367, § 368, § 381, § 382, § 383, § 384, § 6110, § 897, § 1291, § 1297, § 1502, § 1503

Ruling dated

July 24, 2009

Publicly released

October 30, 2009

Source

View Official PDF

Apply this to your situation

This page covers one taxpayer's ruling, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

The IRS ruled on a global restructuring intended to realign the businesses of a foreign parent and its U.S. affiliated group. The plan included entity conversions, a merger of the U.S. parent into a subsidiary, a merger of another subsidiary, contributions of stock and assets, distributions of promissory notes, and three spin-offs of subsidiary stock to the foreign parent. The IRS generally granted nonrecognition treatment for the described reorganizations and distributions, along with carryover bases, holding periods, and earnings-and-profits allocations. The ruling also addressed foreign-corporation provisions, consolidated-group consequences, and the treatment of certain distributions under § 301. It did not express an opinion on business purpose, device concerns, possible acquisitions under § 355(e), several § 367 consequences, or whether the foreign corporations were PFICs.

Ruling snapshot

Question: What are the federal income tax consequences of the proposed mergers, conversions, contributions, distributions, and spin-offs?
Outcome: Approved
Key authorities: IRC §§ 301, 332, 355, 357, 358, 361, 362, 367, and 368; Treas. Reg. §§ 1.1502-75, 1.355-2, 1.355-7, and 1.367

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 200944011
Third Party Communication: None
Release Date: 10/30/2009
Date of Communication: Not Applicable
Index Number: 332.01-00, 368.01-00,
301.00-00, 355.01-00,
Person To Contact:
368.04-00
----------------------, ID No. -----------------
Telephone Number:
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Refer Reply To:
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CC:CORP:05
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PLR-114464-09
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Date:
July 24, 2009

TY:

Legend

ForeignParent = -------------------------------

ForeignSub1 = ------------------------

ForeignSub2 = ------------------------------------------------

ForeignSub3 = -------------

ForeignSub4 = ------------------------------------------------------------------------
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ForeignSub5 = ------------------------------------------------------------------------
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ForeignSub6 = --------------------------------------------------

Parent = -----------------------------

Sub1 = -----------------------------------

Sub2 = --------------------------------------------------------

Sub3 = ------------------------------------------

Sub4 = -------------------------------------------------------
PLR-114464-09
2

Sub5 = ----------------------------------------------

Sub6 = ------------------------------------------------------------------------
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BusinessActivityA = ------------------------------------------------------------------------
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BusinessActivityB = -----------------------------------------------------------------------
---------------------------------------------------------
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BusinessActivityC = ------------------------------------------------------------------------
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------------------------------------------------------------------------
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BusinessActivityD = ------------------------------------------------------------------------
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StateA = -------------

CountryA = ------------------------------

CountryB = -----------

CountryC = -----------

Date1 = ----------------

Date2 = -------------------

Date 3 = -------------------

BusinessDivision1 = --------------------

BusinessDivision2 = --------------------------

X% = --------------

Y% = -------------
PLR-114464-09
3

$A = -----------------

NewName = -----------------------------------------------------

DE1 = -----------------

DE2 = -----------------------------

Service Center = -----------------------------------------------------------------------
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Dear ------------:

This letter responds to your representative's March 13, 2009, letter requesting rulings as to the Federal income tax consequences of proposed transactions. Additional information was received subsequently. The material information submitted in that letter and subsequent correspondence is summarized below.

The rulings contained in this letter are based upon facts and representations that were submitted on behalf of the taxpayer and accompanied by a penalty 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. In particular, this office has not reviewed any information pertaining to, and has made no determination regarding: (i) whether the distributions described below satisfy the business purpose requirement of §1.355-2(b) of the Income Tax Regulations (the regulations); (ii) whether the distributions are used principally as a device for the distribution of the earnings and profits of the distributing company or the controlled companies or both (see section 355(a)(1)(B) of the Internal Revenue Code (the Code) and §1.355-2(d) of the regulations); and (iii) whether the distributions are part of a plan (or a series of related transactions) pursuant to which one or more persons will acquire directly or indirectly stock representing a fifty percent (50%) or greater interest in the distributing company or the controlled companies (see section 355(e) of the Code and
§1.355-7 of the regulations).

SUMMARY OF FACTS

ForeignParent is a CountryA company. In Date1, ForeignParent acquired for cash and ForeignParent stock all of the stock of ForeignSub1, a CountryA company.

ForeignSub1 owns all of the stock of both ForeignSub2, a CountryA company, and ForeignSub3, a CountryA company. ForeignSub2 owns X% of the stock of
PLR-114464-09
4

ForeignSub4, a CountryA company, and ForeignSub3 owns the remaining Y%. ForeignSub4 owns all of the stock of Parent, a StateA corporation.

Parent is a holding company that is the common parent of an affiliated group of corporations that files a consolidated return for U.S. federal income tax purposes (the “Parent Group”).

Parent owns all of the stock of Sub1 and Sub2.

Sub1 is a holding company that owns all of the stock of Sub3 and Sub4, and all of the common stock of ForeignSub5.

Sub3 is a holding company that owns all of the stock of Sub5 and Sub6. Sub5 owns all of the stock of ForeignSub6 and all the preference shares of ForeignSub5.

Sub1, Sub2, Sub3, Sub4, Sub5, and Sub6 are all members of the Parent Group and have been so for at least five years.

Sub2 conducts BusinessActivityA. Sub4 conducts BusinessActivityB. Sub5 conducts BusinessActivityC. Sub6 conducts BusinessActivityD. Each of the foregoing corporations has conducted their respective business for at least the preceding five years.

Prior to its Date1 acquisition by ForeignParent, ForeignSub1 and its affiliates did not structurally align entities by business segment. ForeignParent has concluded that the Parent Group’s businesses are not aligned in a manner consistent with the overall ForeignParent corporate business strategy. In order to better align its businesses along functional lines, ForeignParent is undertaking a global restructuring initiative in which certain entities will be realigned to allow for functional reporting on behalf of entire business lines directly to ForeignParent’s senior management in CountryA.

PROPOSED TRANSACTIONS

In order to achieve the business purposes described above, ForeignParent will undertake (or where indicated, has undertaken) the Proposed Transactions which consist of the following series of steps:

All intercompany account balances between and among Sub5, Sub6, Parent,
Sub1, and Sub4 will be settled through contributions and/or distributions.
ForeignSub5 disposed of the following unrelated business divisions to unrelated
third parties: (i) BusinessDivision1 on Date2, and (ii) BusinessDivision2 on
Date3. ForeignSub5 will change its name to NewName (the redacted identifier
“ForeignSub5” refers to the corporation before and after the name-change, as the
case may be).
PLR-114464-09 5
Sub3 will convert to a U.S. limited liability company (“DE1”) (the “Sub3
Conversion”). DE1 will not elect to be treated as other than an entity disregarded
as separate from its owner for U.S. federal income tax purposes under Treas.
Reg. §301.7701-3.
DE1 will distribute the stock of Sub5 and the stock of Sub6 to Sub1.
Sub1 will contribute the common stock of ForeignSub5 to Sub5 (the “Sub5
Contribution”) in exchange for Sub5 stock and a promissory note (the “Sub5
Note”).
Parent will merge into Sub1 with Sub1 surviving (the “Parent Merger”).
Sub2 will merge into a StateA LLC newly formed by Sub1 (“DE2”) (the “Sub2
Merger”). DE2 will not elect to be treated as other than an entity disregarded as
separate from its owner for U.S. federal income tax purposes under Treas. Reg.
§301.7701-3.
Sub6 and Sub4 each will distribute a promissory note (the “Sub6 Note” and the
“Sub4 Note”) to Sub1 (the “Sub6 Note Distribution” and “Sub4 Note Distribution”).
Sub1 will partially repay its obligation to ForeignSub4 with the Sub5 Note, the
Sub6 Note, and the Sub4 Note.
Sub1 will distribute the stock of Sub4 to ForeignSub4 (the “Sub4 Spin-Off”).
Sub1 will distribute the stock of Sub6 to ForeignSub4 (the “Sub6 Spin-Off”).
Sub1 will distribute the stock of Sub5 to ForeignSub4 (the “Sub5 Distribution”)
(together with the Sub5 Contribution, the “Sub5 Spin-Off,” and the Sub5 Spin-Off
together with the Sub4 Spin-Off and the Sub6 Spin-Off, the “Spin-Offs”).
ForeignSub4 will form two new CountryA holding companies (“Sub5 Holding
Company” and “Parent Holding Company”). Each company will be treated as a
corporation for U.S. federal tax purposes.
ForeignSub4 will contribute the stock of Sub5 to Sub5 Holding Company.
ForeignSub4 will contribute the stock of Sub1 to Parent Holding Company.
```
                         REPRESENTATIONS
```

Parent, on behalf of itself and the members of the Parent Group, makes the following representations regarding the Proposed Transactions:

The Sub3 Conversion
PLR-114464-09
6

Sub1, on the date of adoption of the plan of conversion, and at all times until the
deemed liquidation is complete, will be the owner of at least 80 percent of the
total combined voting power of all classes of stock of Sub3 entitled to vote and
the owner of at least 80 percent of the total value of all classes of stock
(excluding nonvoting stock that is limited and preferred as to dividends and
otherwise meets the requirements of section 1504(a)(4)).
No shares of Sub3 stock will have been redeemed during the three years
preceding the date of adoption of the plan of conversion for Sub3.
All deemed distributions pursuant to the plan of conversion will be made within a
single taxable year of Sub3. Upon the Sub3 Conversion, Sub3 will cease to exist
for U.S. federal income tax purposes.
For U.S. federal income tax purposes, Sub3 will retain no assets following the
Sub3 Conversion.
Sub3 will not have acquired assets in any nontaxable transaction at any time,
except for acquisitions occurring more than three years prior to the date of
adoption of the plan of conversion.
No assets of Sub3 have been, or will be, disposed of by either Sub3 or Sub1
except for dispositions in the ordinary course of business, dispositions occurring
more than three years prior to the date of adoption of the plan of conversion, and
transfers occurring as part of the Sub6 and Sub4 Spin-Offs.
The deemed liquidation of Sub3 in the Sub3 Conversion will not be preceded or
followed by the reincorporation, transfer, or sale of all or a part of the business
assets of Sub3 to another corporation (i) that is the alter ego of Sub3 and (ii) that,
directly or indirectly, will be owned more than 20-percent in value by persons
holding directly or indirectly more than 20-percent in value of the stock of Sub3.
For purposes of this representation, ownership will be determined by application
of the constructive ownership rules of section 318(a), as modified by section
304(c)(3).
Prior to the adoption of the plan of conversion, no assets of Sub3 will have been
distributed in kind, transferred, or sold to Sub1, except for (i) transactions
occurring in the normal course of business and (ii) transactions occurring more
than three years prior to the date of adoption of the plan of conversion.
Sub3 will report all earned income represented by assets that will be deemed
distributed to Sub1 such as receivables being reported on a cash basis,
unfinished construction contracts, commissions due, etc.
PLR-114464-09 7
The fair market value of the assets of Sub3 will exceed its liabilities both at the
date of adoption of the plan of conversion and immediately prior to the Sub3
Conversion.
Other than the approximately $A intercompany payable from Sub3 to Sub1 that
will be settled in Step 1, there is no intercorporate debt existing between Sub1
and Sub3 and none has been cancelled, forgiven, or discounted, except for
transactions that occurred more than three years prior to the date of adoption of
the plan of conversion.
Sub1 is not an organization that is exempt from U.S. federal income tax under
section 501 or any other provision of the Code.
All other transactions undertaken contemporaneously with, in anticipation of, in
conjunction with, or in any way related to, the Sub3 Conversion have been fully
disclosed.
The Sub3 Conversion will not result in the transfer of stock of any corporation
that has been the U.S. transferor, the transferee foreign corporation, or the
transferred corporation, or successor thereto, with respect to any unexpired “gain
recognition agreement” within the meaning of Treas. Reg. §§1.367(a)-3,
1.367(a)-8 and 1.367(a)-8T.
Sub3 has not incurred any losses that are subject to an agreement, election or
certification filed pursuant to section 1503(d) and the regulations thereunder.
Sub3 does not carry on activities that would rise to the level of a qualified
business unit and which, pursuant to Treas. Reg. §1.985-1, would be treated as
having a functional currency other than the U.S. dollar.

The Parent Merger

The fair market value of the Sub1 stock received by Parent’s shareholder(s) in
the Parent Merger will be approximately equal to the fair market value of the
Parent stock surrendered in the exchange.
The Parent Merger will be effected pursuant to state law, under which, as a result
of the operation of such laws, the following events will occur simultaneously at
the effective time of the Parent Merger: (i) all of the assets (other than those
distributed in the transaction) and liabilities (except to the extent satisfied or
discharged in the transaction) of Parent will become the assets and liabilities of
Sub1; and (ii) Parent will cease its separate legal existence for all purposes.
All of the proprietary interests in Parent will be exchanged for Sub1 stock and will
be preserved within the meaning of Treas. Reg. §1.368-1(e)(1)(i) and (ii). Sub1
PLR-114464-09 8

has no plan or intention to reacquire, directly or through a related person (within
the meaning of Treas. Reg. §1.368-1(e)(2) and (3)), any of its stock issued in the
Parent Merger.
The fair market value of the property transferred by Parent to Sub1 will exceed
the sum of (a) the amount of liabilities of Parent assumed by Sub1 in the Parent
Merger, and (b) the amount of any money and the fair market value of any
property (other than stock permitted to be received under section 361(a) without
the recognition of gain) received by Parent in the Parent Merger; and the fair
market value of the assets of Sub1 will exceed the amount of its liabilities
immediately after the Parent Merger.
Sub1 has no plan or intention to sell or otherwise dispose of any of the assets of
Parent acquired in the Parent Merger, except for dispositions made in the
ordinary course of business.
The liabilities of Parent, if any, assumed (within the meaning of section 357(d))
by Sub1 in the Parent Merger were incurred by Parent in the ordinary course of
its business.
Following the Parent Merger, (i) Sub1 will continue its historic business and (ii)
will continue the historic business of Parent or use a significant portion of
Parent’s historic business assets in a business.
Sub1, Parent, and Parent’s shareholder(s) will each pay their respective
expenses, if any, incurred in connection with the Parent Merger.
There is no intercorporate indebtedness existing between Parent and Sub1 that
was issued, acquired, or will be settled at a discount.
No two parties to the Parent Merger are investment companies within the
meaning of section 368(a)(2)(F)(iii) and (iv).
Parent is not under the jurisdiction of a court in a title 11 or similar case within the
meaning of section 368(a)(3)(A).
The Parent Merger will not result in the transfer of stock of any corporation that
has been the U.S. transferor, the transferee foreign corporation, or the
transferred corporation, or successor thereto, with respect to any unexpired “gain
recognition agreement” within the meaning of Treas. Reg. §§1.367(a)-3,
1.367(a)-8 and 1.367(a)-8T.
Neither Parent, nor any member of the Parent Group, has incurred losses that
are subject to an agreement, election or certification filed pursuant to section
1503(d) and the regulations thereunder.
PLR-114464-09 9
Parent does not carry on activities that would rise to the level of a qualified
business unit and which, pursuant to Treas. Reg. §1.985-1, would be treated as
having a functional currency other than the U.S. dollar.
Parent has not been at any time during the five year period ending on the date of
the Parent Merger a United States Real Property Holding Company, as defined
under section 897(c) and Treas. Reg. §1.897-2(b).
ForeignSub4 will establish that its interest in Parent is not a United States real
property interest, pursuant to Treas. Reg. §1.897-2(g)(1)(i)(A), by obtaining a
statement from Parent in accordance with the provisions of Treas. Reg. §1.897-
2(g)(1)(ii).
Parent will provide notice to the Internal Revenue Service, pursuant to Treas.
Reg. §1.897-2(h)(2) and will provide the statement requested by ForeignSub4 to
Service Center on or before the 30th day after the requested statement is mailed
to ForeignSub4.

The Sub2 Merger

The fair market value of the Sub1 stock deemed received by Sub 2’s
shareholder(s) in the Sub2 Merger will be approximately equal to the fair market
value of the Sub2 stock deemed surrendered in the exchange.
The Sub2 Merger will be effected pursuant to state law, under which, as a result
of the operation of such law, the following events will occur simultaneously at the
effective time of the Sub2 Merger: (i) all of the assets (other than those
distributed in the transaction) and liabilities (except to the extent satisfied or
discharged in the transaction) of Sub2 will become the assets and liabilities of
one or more members of the Sub1 combining unit; and (ii) Sub2 will cease its
separate legal existence for all purposes.
All of the proprietary interests in Sub2 will be deemed exchanged for Sub1 stock
and will be preserved within the meaning of Treas. Reg. §1.368-1(e)(1)(i) and (ii).
Sub1 has no plan or intention to reacquire, directly or through a related person
(within the meaning of Treas. Reg. §1.368-1(e)(2) and (3)), any of its stock
deemed issued in the Sub2 Merger.
The fair market value of the property transferred by Sub2 to Sub1 will exceed the
sum of (a) the amount of liabilities of Sub2 assumed by Sub1 in the Sub2
Merger, and (b) the amount of any money and the fair market value of any
property (other than stock permitted to be received under section 361(a) without
the recognition of gain) deemed received by Sub2 in the Sub2 Merger; and the
fair market value of the assets of Sub1 will exceed the amount of its liabilities
immediately after the Sub2 Merger.
PLR-114464-09 10
Sub1 has no plan or intention to sell or otherwise dispose of any of the assets of
Sub2 acquired in the Sub2 Merger, except for dispositions made in the ordinary
course of business.
The liabilities of Sub2, if any, assumed (within the meaning of section 357(d)) by
Sub1 in the Sub2 Merger were incurred by Sub2 in the ordinary course of its
business.
Following the Sub2 Merger, Sub1 will continue the historic business of Sub2 or
use a significant portion of the Sub2 historic business assets in a business.
Sub1, Sub2, and Sub2’s shareholder(s) will each pay their respective expenses,
if any, incurred in connection with the Sub2 Merger.
There is no intercorporate indebtedness existing between Sub2 and Sub1 that
was issued, acquired, or will be settled at a discount.
No two parties to the Sub2 Merger are investment companies within the meaning
of section 368(a)(2)(F)(iii) and (iv).
Sub2 is not under the jurisdiction of a court in a title 11 or similar case within the
meaning of section 368(a)(3)(A).
The Sub2 Merger will not result in the transfer of stock of any corporation that
has been the U.S. transferor, the transferee foreign corporation, or the
transferred corporation, or successor thereto, with respect to any unexpired “gain
recognition agreement” within the meaning of Treas. Reg. §§1.367(a)-3,
1.367(a)-8 and 1.367(a)-8T.
Neither Sub1, nor any member of the Sub1 consolidated group, including Sub2,
has incurred losses that are subject to an agreement, election or certification filed
pursuant to section 1503(d) and the regulations thereunder.
Sub2 does not carry on activities that would rise to the level of a qualified
business unit and which, pursuant to Treas. Reg. §1.985-1, would be treated as
having a functional currency other than the U.S. dollar.

The Sub4 Spin-Off

Any indebtedness owed by Sub4 to Sub1 after the Sub4 Spin-Off will not
constitute stock or securities.
No part of the consideration distributed by Sub1 will be received by ForeignSub4
as a creditor, employee, or in any capacity other than that of a shareholder of
Sub1.
PLR-114464-09 11
The five years of financial information submitted on behalf of the
BusinessActivityA conducted by Sub2 (and to be conducted by Sub1 after the
Sub2 Merger) represents its present operation, and with regard to that business,
there have been no substantial operational changes since the date of the last
financial statements submitted.
Neither the BusinessActivityA conducted by Sub2 nor control of an entity
conducting this business will have been acquired during the five-year period
ending on the date of the Sub4 Spin-Off in a transaction in which gain or loss
was recognized (or treated as recognized under Prop. Reg. §1.355-3) in whole or
in part. Throughout the five-year period ending on the date of the Sub2 Merger,
Sub2 will have been the principal owner of the goodwill and significant assets of
the BusinessActivityA, and Sub1 will be the owner of these assets following the
Sub2 Merger and the Sub4 Spin-Off.
The five years of financial information submitted on behalf of the
BusinessActivityB that will be conducted by Sub4 immediately after the Sub4
Spin-Off represents its present operation, and with regard to that business, there
have been no substantial operational changes since the date of the last financial
statements submitted.
Neither the BusinessActivityB conducted by Sub4 nor control of an entity
conducting this business will have been acquired during the five-year period
ending on the date of the Sub4 Spin-Off in a transaction in which gain or loss
was recognized (or treated as recognized under Prop. Reg. §1.355-3) in whole or
in part. Throughout the five-year period ending on the date of the Sub4 Spin-Off,
Sub4 will have been the principal owner of the goodwill and significant assets of
the BusinessActivityB, and Sub4 will continue to be the owner of these assets
following the Sub4 Spin-Off.
Following the Sub4 Spin-Off, Sub1 and Sub4 will each continue the active
conduct of its business, independently and with its separate employees.
The Sub4 Spin-Off will be carried out to (i) facilitate the ForeignParent global
restructuring by realigning the historic Sub1 businesses according to their
function and (ii) obtain cost savings by closing the Sub1 U.S. management office.
The Sub4 Spin-Off is motivated, in whole or substantial part, by one or more of
these corporate business purposes.
The Sub4 Spin-Off will not be used principally as a device for the distribution of
earnings and profits of Sub1 or Sub4 or both.
There is no plan or intention to liquidate either Sub1 or Sub4, to merge either
corporation with any other corporation, or to sell or otherwise dispose of the
PLR-114464-09 12

assets of either corporation after the Sub4 Spin-Off, except in the ordinary course
of business.
Sub1 will neither accumulate its receivables nor make extraordinary payment of
its payables in anticipation of the Sub4 Spin-Off.
No intercorporate debt will exist between Sub1, on the one hand, and Sub4 and
its subsidiaries, on the other hand, at the time of, or after, the Sub4 Spin-Off,
other than intercompany loans or obligations that have arisen, or will arise,
between the parties in the ordinary course of business.
Payments made in connection with all continuing transactions, if any, between
Sub1 and Sub4 will be for fair market value based on terms and conditions
arrived at by the parties bargaining at arm’s length.
Neither Sub1 nor Sub4 is an investment company as defined in section
368(a)(2)(F)(iii) and (iv).
Immediately before the Sub4 Spin-Off, items of income, gain, loss, deduction,
and credit will be taken into account as required by the applicable intercompany
transaction regulations (see Treas. Reg. §1.1502-13 and -14 as in effect before
the publication of T.D. 8597, 1995-2 C.B. 147, and as currently in effect; Treas.
Reg. §1.1502-13 as published by T.D. 8597). Further, any excess loss account
that Sub1 has in the Sub4 stock (or the stock of any direct or indirect subsidiary
of Sub4) will be included in income immediately before the Sub4 Spin-Off to the
extent required by regulations (see §1.1502-19). At the time of the Sub4 Spin-
Off, Sub1 will not have an excess loss account in the stock of Sub4 (or the stock
of any direct or indirect subsidiary of Sub4).
For purposes of section 355(d), immediately after the Sub4 Spin-Off, no person
(determined after applying section 355(d)(7)) except for ForeignParent will hold
stock possessing 50 percent or more of the total combined voting power and 50
percent or more of the total value of all classes of Sub1 stock, that was acquired
by purchase (as defined in section 355(d)(5) and (8)) during the five-year period
(determined after applying section 355(d)(6)) ending on the date of the Sub4
Spin-Off.
For purposes of section 355(d), immediately after the Sub4 Spin-Off, no person
(determined after applying section 355(d)(7)) except for ForeignParent will hold
stock possessing 50 percent or more of the total combined voting power and 50
percent or more of the total value of all classes of Sub4 stock, that was either (a)
acquired by purchase (as defined in section 355(d)(5) and (8)) during the five-
year period (determined after applying section 355(d)(6)) ending on the date of
the Sub4 Spin-Off or (b) attributable to distributions on Sub1 stock or securities
that were acquired by purchase (as defined in sections 355(d)(5) and (8)) during
PLR-114464-09 13

the five-year period (determined after applying section 355(d)(6)) ending on the
date of the Sub4 Spin-Off.
The Sub4 Spin-Off will neither increase ForeignParent’s ownership (combined
direct and indirect) in Sub1 or Sub4 nor provide ForeignParent with a purchased
basis (within the meaning of Treas. Reg. §1.355-6(b)(3)(iii)) in the stock of Sub4.
The Sub4 Spin-Off is not part of a plan or series of related transactions (within
the meaning of Treas. Reg. §1.355-7) pursuant to which one or more persons will
acquire directly or indirectly stock representing a 50-percent or greater interest
(within the meaning of section 355(d)(4)) in Sub1 or Sub4 (including any
predecessor or successor of any such corporation).
Immediately after the transaction (as defined in section 355(g)(4)), either (1) no
person will hold a 50-percent or greater interest (within the meaning of section
355(g)(3)) in Sub1 or Sub4, (2) if any person holds a 50-percent or greater
interest (within the meaning of section 355(g)(3)) in any disqualified investment
corporation (within the meaning of section 355(g)(2)), such person will have held
such interest in such corporation immediately before the transaction, or (3)
neither Sub1 nor Sub4 will be a disqualified investment corporation (within the
meaning of section 355(g)(2)).
The Sub4 Spin-Off will not result in the transfer of stock of any corporation that
has been the U.S. transferor, the transferee foreign corporation, or the
transferred corporation, or successor thereto, with respect to any unexpired “gain
recognition agreement” within the meaning of Treas. Reg. §§1.367(a)-3,
1.367(a)-8 and 1.367(a)-8T.
Neither Sub1, nor any member of the Sub1 consolidated group, including Sub4,
has incurred losses that are subject to an agreement, election or certification filed
pursuant to section 1503(d) and the regulations thereunder.
Sub1 has not been at any time during the five year period ending on the date of
the Sub4 Spin-Off a United States Real Property Holding Company, as defined
under section 897(c) and Treas. Reg. §1.897-2(b).
ForeignSub4 will establish that its interest in Sub1 is not a United States real
property interest, pursuant to Treas. Reg. §1.897-2(g)(1)(i)(A), by obtaining a
statement from Sub1 in accordance with the provisions of Treas. Reg. §1.897-
2(g)(1)(ii).
Sub1 will provide notice to the Internal Revenue Service, pursuant to Treas. Reg.
§1.897-2(h)(2) and will provide a statement requested by ForeignSub4 to the
Service Center on or before the 30th day after the requested statement is mailed
to ForeignSub4.
PLR-114464-09 14
Sub1 and Sub4 will apply the provisions of Treas. Reg. §1.1502-9T(c)(2), as
applicable, for purposes of apportioning any Consolidated Overall Foreign Loss,
Consolidated Separate Limitation Loss or Consolidated Overall Domestic Loss
accounts, as applicable between Sub1 and Sub4 when Sub4 ceases to be a
member of the Sub1 consolidated group as a result of the Sub4 Spin-Off.

The Sub6 Spin-Off

Any indebtedness owed by Sub6 to Sub1 after the Sub6 Spin-Off will not
constitute stock or securities.
No part of the consideration distributed by Sub1 will be received by ForeignSub4
as a creditor, employee, or in any capacity other than that of a shareholder of
Sub1.
The five years of financial information submitted on behalf of the
BusinessActivityA conducted by Sub2 (and to be conducted by Sub1 after the
Sub2 Merger) represents its present operation, and with regard to that business,
there have been no substantial operational changes since the date of the last
financial statements submitted.
Neither the BusinessActivityA conducted by Sub2 nor control of an entity
conducting this business will have been acquired during the five-year period
ending on the date of the Sub6 Spin-Off in a transaction in which gain or loss
was recognized (or treated as recognized under Prop. Reg. §1.355-3) in whole or
in part. Throughout the five-year period ending on the date of the Sub2 Merger,
Sub2 will have been the principal owner of the goodwill and significant assets of
the BusinessActivityA and Sub1 will be the owner of these assets following the
Sub2 Merger and the Sub6 Spin-Off.
The five years of financial information submitted on behalf of the Sub6 Business
that will be conducted by Sub6 immediately after the Sub6 Spin-Off represents its
present operation, and with regard to that business, there have been no
substantial operational changes since the date of the last financial statements
submitted.
Neither the Sub6 Business conducted by Sub6 nor control of an entity conducting
this business was acquired during the five-year period ending on the date of the
Sub6 Spin-Off in a transaction in which gain or loss was recognized (or treated
as recognized under Prop. Reg. §1.355-3) in whole or in part. Throughout the
five-year period ending on the date of the Sub6 Spin-Off, Sub6 will have been the
principal owner of the goodwill and significant assets of the Sub6 Business, and
Sub6 will continue to be the owner following the Sub6 Spin-Off.
PLR-114464-09 15
Following the Sub6 Spin-Off, Sub1 and Sub6 will each continue the active
conduct of its business, independently and with its separate employees.
The Sub6 Spin-Off will be carried out to (i) facilitate the ForeignParent global
restructuring by realigning the historic Sub1 businesses according to their
function and (ii) obtain cost savings by closing the Sub1 U.S. management office.
The Sub6 Spin-Off is motivated, in whole or substantial part, by one or more of
these corporate business purposes.
The Sub6 Spin-Off will not be used principally as a device for the distribution of
earnings and profits of Sub1 or Sub6 or both.
There is no plan or intention to liquidate either Sub1 or Sub6, to merge either
corporation with any other corporation, or to sell or otherwise dispose of the
assets of either corporation after the Sub6 Spin-Off, except in the ordinary course
of business.
Sub1 will neither accumulate its receivables nor make extraordinary payment of
its payables in anticipation of the Sub6 Spin-Off.
No intercorporate debt will exist between Sub1, on the one hand, and Sub6 and
its subsidiaries, on the other hand, at the time of, or after, the Sub6 Spin-Off,
other than intercompany loans or obligations that have arisen, or will arise,
between the parties in the ordinary course of business.
Payments made in connection with all continuing transactions, if any, between
Sub1 and Sub6 will be for fair market value based on terms and conditions
arrived at by the parties bargaining at arm’s length.
Neither Sub1 nor Sub6 is an investment company as defined in section
368(a)(2)(F)(iii) and (iv).
Immediately before the Sub6 Spin-Off, items of income, gain, loss, deduction,
and credit will be taken into account as required by the applicable intercompany
transaction regulations (see Treas. Reg. §1.1502-13 and -14 as in effect before
the publication of T.D. 8597, 1995-2 C.B. 147, and as currently in effect; Treas.
Reg. §1.1502-13 as published by T.D. 8597). Further, any excess loss account
that Sub1 has in the Sub6 stock (or the stock of any direct or indirect subsidiary
of Sub6) will be included in income immediately before the Sub6 Spin-Off to the
extent required by regulations (see §1.1502-19). At the time of the Sub6 Spin-
Off, Sub1 will not have an excess loss account in the stock of Sub6 (or the stock
of any direct or indirect subsidiary of Sub6).
For purposes of section 355(d), immediately after the Sub6 Spin-Off, no person
(determined after applying section 355(d)(7)) except for ForeignParent will hold
PLR-114464-09 16

stock possessing 50 percent or more of the total combined voting power and 50
percent or more of the total value of all classes of Sub1 stock, that was acquired
by purchase (as defined in section 355(d)(5) and (8)) during the five-year period
(determined after applying section 355(d)(6)) ending on the date of the Sub6
Spin-Off.
For purposes of section 355(d), immediately after the Sub6 Spin-Off, no person
(determined after applying section 355(d)(7)) except for ForeignParent will hold
stock possessing 50 percent or more of the total combined voting power and 50
percent or more of the total value of all classes of Sub6 stock, that was either (a)
acquired by purchase (as defined in section 355(d)(5) and (8)) during the five-
year period (determined after applying section 355(d)(6)) ending on the date of
the Sub6 Spin-Off or (b) attributable to distributions on Sub1 stock or securities
that were acquired by purchase (as defined in sections 355(d)(5) and (8)) during
the five-year period (determined after applying section 355(d)(6)) ending on the
date of the Sub6 Spin-Off.
The Sub6 Spin-Off will neither increase ForeignParent’s ownership (combined
direct and indirect) in Sub1 or Sub6 nor provide ForeignParent with a purchased
basis (within the meaning of Treas. Reg. §1.355-6(b)(3)(iii)) in the stock of Sub6.
The Sub6 Spin-Off is not part of a plan or series of related transactions (within
the meaning of Treas. Reg. §1.355-7) pursuant to which one or more persons will
acquire directly or indirectly stock representing a 50-percent or greater interest
(within the meaning of section 355(d)(4)) in Sub1 or Sub6 (including any
predecessor or successor of any such corporation).
Immediately after the transaction (as defined in section 355(g)(4)), either (1) no
person will hold a 50-percent or greater interest (within the meaning of section
355(g)(3)) in Sub1 or Sub6, (2) if any person holds a 50-percent or greater
interest (within the meaning of section 355(g)(3)) in any disqualified investment
corporation (within the meaning of section 355(g)(2)), such person will have held
such interest in such corporation immediately before the transaction, or (3)
neither Sub1 nor Sub6 will be a disqualified investment corporation (within the
meaning of section 355(g)(2)).
The Sub6 Spin-Off will not result in the transfer of stock of any corporation that
has been the U.S. transferor, the transferee foreign corporation, or the
transferred corporation, or successor thereto, with respect to any unexpired “gain
recognition agreement” within the meaning of Treas. Reg. §§1.367(a)-3,
1.367(a)-8 and 1.367(a)-8T.
Neither Sub1, nor any member of the Sub1 consolidated group, including Sub6,
has incurred losses that are subject to an agreement, election or certification filed
pursuant to section 1503(d) and the regulations thereunder.
PLR-114464-09 17
Sub1 has not been at any time during the five year period ending on the date of
the Sub6 Spin-Off a United States Real Property Holding Company, as defined
under section 897(c) and Treas. Reg. §1.897-2(b).
ForeignSub4 will establish that its interest in Sub1 is not a United States real
property interest, pursuant to Treas. Reg. §1.897-2(g)(1)(i)(A), by obtaining a
statement from Sub1 in accordance with the provisions of Treas. Reg. §1.897-
2(g)(1)(ii).
Sub1 will provide notice to the Internal Revenue Service, pursuant to Treas. Reg.
§1.897-2(h)(2) and will provide a statement requested by ForeignSub4 to the
Service Center on or before the 30th day after the requested statement is mailed
to ForeignSub4.
Sub1 and Sub6 will apply the provisions of Treas. Reg. §1.1502-9T(c)(2), as
applicable, for purposes of apportioning any Consolidated Overall Foreign Loss,
Consolidated Separate Limitation Loss or Consolidated Overall Domestic Loss
accounts, between Sub1 and Sub6 when Sub6 ceases to be a member of the
Sub1 consolidated group as a result of the Sub6 Spin-Off.

The Sub5 Spin-Off

Any indebtedness owed by Sub5 to Sub1 after the Sub5 Distribution will not
constitute stock or securities.
No part of the consideration distributed by Sub1 will be received by ForeignSub4
as a creditor, employee, or in any capacity other than that of a shareholder of
Sub1, except for the receipt of the Sub5 Note by ForeignSub4 in its capacity as a
creditor in full or partial satisfaction of the Sub1 indebtedness.
The five years of financial information submitted on behalf of the
BusinessActivityA conducted by Sub2 (and to be conducted by Sub1 after the
Sub2 Merger) represents its present operation, and with regard to that business,
there have been no substantial operational changes since the date of the last
financial statements submitted.
Neither the BusinessActivityA conducted by Sub2 nor control of an entity
conducting this business will have been acquired during the five-year period
ending on the date of the Sub5 Distribution in a transaction in which gain or loss
was recognized (or treated as recognized under Prop. Reg. §1.355-3) in whole or
in part. Throughout the five-year period ending on the date of the Sub2 Merger,
Sub2 will have been the principal owner of the goodwill and significant assets of
the BusinessActivityA, and Sub1 will continue to be the owner of these assets
following the Sub2 Merger and the Sub5 Distribution.
PLR-114464-09 18
The five years of financial information submitted on behalf of the
BusinessActivityC that will be conducted by Sub5 immediately after the Sub5
Distribution represents its present operation, and with regard to that business,
there have been no substantial operational changes since the date of the last
financial statements submitted.
Neither the BusinessActivityC conducted by Sub5 nor control of an entity
conducting this business will have been acquired during the five-year period
ending on the date of the Sub5 Distribution in a transaction in which gain or loss
was recognized (or treated as recognized under Prop. Reg. §1.355-3) in whole or
in part. Throughout the five-year period ending on the date of the Sub5
Distribution, Sub5 will have been the principal owner of the goodwill and
significant assets of the BusinessActivityC, and Sub5 will continue to be the
owner following the Sub5 Distribution.
Following the Sub5 Distribution, Sub1 and Sub5 will each continue the active
conduct of its business, independently and with its separate employees.
The Sub5 Distribution will be carried out to (i) facilitate the ForeignParent global
restructuring by realigning the historic Sub1 businesses according to their
function, and (ii) obtain cost savings by closing the Sub1 U.S. management
office. The Sub5 Distribution is motivated, in whole or substantial part, by one or
more of these corporate business purposes.
The Sub5 Distribution will not be used principally as a device for the distribution
of earnings and profits of Sub1 or Sub5 or both.
There is no plan or intention to liquidate either Sub1 or Sub5, to merge either
corporation with any other corporation, or to sell or otherwise dispose of the
assets of either corporation after the Sub5 Distribution, except in the ordinary
course of business or in a possible future combination of BusinessActivityC with
ForeignSub6.
Sub1 will neither accumulate its receivables nor make extraordinary payment of
its payables in anticipation of the Sub5 Contribution and Sub5 Distribution.
No intercorporate debt will exist between Sub1, on the one hand, and Sub5 and
its subsidiaries, on the other hand, at the time of, or after, the Sub5 Distribution,
other than intercompany loans or obligations that have arisen, or will arise,
between the parties in the ordinary course of business.
Payments made in connection with all continuing transactions, if any, between
Sub1 and Sub5 will be for fair market value based on terms and conditions
arrived at by the parties bargaining at arm’s length.
PLR-114464-09 19
Neither Sub1 nor Sub5 is an investment company as defined in section
368(a)(2)(F)(iii) and (iv).
Immediately before the Sub5 Distribution, items of income, gain, loss, deduction,
and credit will be taken into account as required by the applicable intercompany
transaction regulations (see Treas. Reg. §1.1502-13 and -14 as in effect before
the publication of T.D. 8597, 1995-2 C.B. 147, and as currently in effect; Treas.
Reg. §1.1502-13 as published by T.D. 8597). Further, any excess loss account
that Sub1 has in the Sub5 stock (or the stock of any direct or indirect subsidiary
of Sub5) will be included in income immediately before the Sub5 Distribution to
the extent required by regulations (see §1.1502-19). At the time of the Sub5
Distribution, Sub1 will not have an excess loss account in the stock of Sub5 (or
the stock of any direct or indirect subsidiary of Sub5).
The aggregate fair market value of the assets contributed to Sub5 in the Sub5
Contribution will exceed the aggregate basis of those assets immediately after
the Sub5 Contribution.
The total adjusted basis and the fair market value of the assets transferred to
Sub5 in the Sub5 Contribution each will equal or exceed the sum of (i) the total
liabilities to be assumed (as determined under section 357(d)) by Sub5 and (ii)
the total amount of any money and the fair market value of any other property
(within the meaning of section 361(b)) received by Sub1 from Sub5 and
transferred to Sub1’s creditors in connection with the reorganization.
The liabilities to be assumed (as determined under section 357(d)) by Sub5 in
the Sub5 Contribution, if any, will have been incurred in the ordinary course of
business and will be associated with the assets being transferred.
The total fair market value of the assets transferred to Sub5 in the Sub5
Contribution will exceed the sum of (i) the amount of any liabilities assumed
(within the meaning of section 357(d)) by Sub5 in connection with the exchange,
(ii) the amount of any liabilities owed to Sub5 by Sub1 that are discharged or
extinguished in connection with the exchange, and (iii) the amount of any cash
and the fair market value of any other property (other than stock and securities
permitted to be received under section 361(a) without the recognition of gain)
received by Sub1 in connection with the exchange. The fair market value of the
assets of Sub5 will exceed the amount of its liabilities immediately after the
exchange.
The amount of the Sub5 Note issued will not exceed Sub1’s basis in its
ForeignSub5 stock that is contributed to Sub5 in the Sub5 Contribution.
For purposes of section 355(d), immediately after the Sub5 Spin-Off, no person
(determined after applying section 355(d)(7)) except for ForeignParent will hold
PLR-114464-09 20

stock possessing 50 percent or more of the total combined voting power and 50
percent or more of the total value of all classes of Sub1 stock, that was acquired
by purchase (as defined in section 355(d)(5) and (8)) during the five-year period
(determined after applying section 355(d)(6)) ending on the date of the Sub5
Spin-Off.
For purposes of section 355(d), immediately after the Sub5 Spin-Off, no person
(determined after applying section 355(d)(7)) except for ForeignParent will hold
stock possessing 50 percent or more of the total combined voting power and 50
percent or more of the total value of all classes of Sub5 stock, that was either (a)
acquired by purchase (as defined in section 355(d)(5) and (8)) during the five-
year period (determined after applying section 355(d)(6)) ending on the date of
the Sub5 Spin-Off or (b) attributable to distributions on Sub1 stock or securities
that were acquired by purchase (as defined in sections 355(d)(5) and (8)) during
the five-year period (determined after applying section 355(d)(6)) ending on the
date of the Sub5 Spin-Off.
The Sub5 Spin-Off will neither increase ForeignParent’s ownership (combined
direct and indirect) in Sub1 or Sub5 nor provide ForeignParent with a purchased
basis (within the meaning of Treas. Reg. §1.355-6(b)(3)(iii)) in the stock of Sub5.
The Sub5 Distribution is not part of a plan or series of related transactions (within
the meaning of Treas. Reg. §1.355-7) pursuant to which one or more persons will
acquire directly or indirectly stock representing a 50-percent or greater interest
(within the meaning of section 355(d)(4)) in Sub1 or Sub5 (including any
predecessor or successor of any such corporation).
Immediately after the transaction (as defined in section 355(g)(4)), either (1) no
person will hold a 50-percent or greater interest (within the meaning of section
355(g)(3)) in Sub1 or Sub5, (2) if any person holds a 50-percent or greater
interest (within the meaning of section 355(g)(3)) in any disqualified investment
corporation (within the meaning of section 355(g)(2)), such person will have held
such interest in such corporation immediately before the transaction, or (3)
neither Sub1 nor Sub5 will be a disqualified investment corporation (within the
meaning of section 355(g)(2)).
The Sub5 Spin-Off will not result in the transfer of stock of any corporation that
has been the U.S. transferor, the transferee foreign corporation, or the
transferred corporation, or successor thereto, with respect to any unexpired “gain
recognition agreement” within the meaning of Treas. Reg. §§1.367(a)-3,
1.367(a)-8 and 1.367(a)-8T.
Neither Sub1, nor any member of the Sub1 consolidated group, including Sub5,
has incurred losses that are subject to an agreement, election or certification filed
pursuant to section 1503(d) and the regulations thereunder.
PLR-114464-09 21
Sub1 has not been at any time during the five year period ending on the date of
the Sub5 Spin-Off a United States Real Property Holding Company, as defined
under section 897(c) and Treas. Reg. §1.897-2(b).
ForeignSub4 will establish that its interest in Sub1 is not a United States real
property interest, pursuant to Treas. Reg. §1.897-2(g)(1)(i)(A), by obtaining a
statement from Sub1 in accordance with the provisions of Treas. Reg. §1.897-
2(g)(1)(ii).
Sub1 will provide notice to the Internal Revenue Service, pursuant to Treas. Reg.
§1.897-2(h)(2) and will provide a statement requested by ForeignSub4 to the
Service Center on or before the 30th day after the requested statement is mailed
to ForeignSub4.
Sub1 and Sub5 will apply the provisions of Treas. Reg. §1.1502-9T(c)(2), as
applicable, for purposes of apportioning any Consolidated Overall Foreign Loss,
Consolidated Separate Limitation Loss or Consolidated Overall Domestic Loss
accounts, between Sub1 and Sub5 when Sub5 ceases to be a member of the
Sub1 consolidated group as a result of the Sub5 Spin-Off.
```
                               RULINGS
```

Based solely on the information submitted and the representations set forth above, we rule as follows:

The Sub3 Conversion (Step 3)

The change in classification of Sub3 from a corporation into a StateA LLC
disregarded as separate from its owner under Treas. Reg. § 301.7701-3 will be
treated for U.S. federal income tax purposes as a complete liquidation of Sub3
into Sub1 (Treas. Reg. §301.7701-3(g)(1)(iii)).
No gain or loss will be recognized by Sub1 or Sub3 in the Sub3 Conversion
(sections 332(a), 336(d)(3) and 337(a)).
Sub1’s basis in each asset deemed received from Sub3 in the Sub3 Conversion
will equal the basis of that asset in the hands of Sub3 immediately before the
Sub3 Conversion (section 334(b)(1)).
Sub1’s holding period in each asset deemed received from Sub3 in the Sub3
Conversion will include the period during which the asset was held by Sub3
(section 1223(2)).
Sub1 will succeed to and take into account the items of Sub3 described in
section 381(c), subject to the conditions and limitations specified in sections 381,
382, 383, and 384 and the regulations thereunder.
PLR-114464-09 22
Sub1 will succeed to and take into account the earnings and profits, or deficit in
earnings and profits, of Sub3 as of the date of the Sub3 Conversion (sections
381(a)(1) and 381(c)(2)). Any deficit in earnings and profits will be used only to
offset earnings and profits accumulated after the date of the Sub3 Conversion
(section 381(c)(2)(B)). To the extent the Sub3 earnings and profits are reflected
in the Sub1 earnings and profits, the Sub3 earnings and profits to which Sub1
succeeds must be adjusted to prevent duplication (Treas. Reg. §1.1502-33(a)).

The Parent Merger

The Parent Merger will qualify as a reorganization under section 368(a)(1)(A).
Sub1 and Parent will each be a “party to a reorganization” within the meaning of
section 368(b).
No gain or loss will be recognized by Parent on the transfer of its assets to Sub1
in exchange for Sub1 stock and the assumption by Sub1 of any liabilities of
Parent (sections 361(a) and 357(a)).
No gain or loss will be recognized by Parent upon the transfer of Sub1 stock to
Parent’s shareholder(s) (section 361(c)).
No gain or loss will be recognized by Sub1 on the receipt of the Parent assets in
exchange for Sub1 stock (section 1032(a)).
Sub1’s basis in each asset received from Parent will equal the basis of that asset
in the hands of Parent immediately before the Parent Merger (section 362(b)).
Sub1’s holding period in each asset received from Parent will include the period
during which Parent held the asset (section 1223(2)).
No gain or loss will be recognized by Parent’s shareholder(s) on the receipt of
Sub1 stock in exchange for Parent stock (section 354(a)(1)).
The basis in the Sub1 stock received by Parent’s shareholder(s) will equal the
basis of the Parent stock surrendered in exchange therefor (section 358(a)(1)).
The holding period in the Sub1 stock received by Parent’s shareholder(s) will
include the holding period of the Parent stock surrendered in exchange therefor,
provided the Parent stock was held as a capital asset on the date of the
exchange (section 1223(1)).
Sub1 will succeed to and take into account the items of Parent described in
section 381(c), subject to the conditions and limitations specified in sections 381,
382, 383, and 384 and the regulations thereunder.
PLR-114464-09 23
The Parent Group will remain in existence after the Parent Merger, with Sub1,
the surviving entity in the Parent Merger, as the common parent (§1.1502-
75(d)(2)(ii)).

The Sub2 Merger (Step 7)

The Sub2 Merger will qualify as a reorganization under section 368(a)(1)(A).
Sub1 and Sub2 will each be a “party to a reorganization” within the meaning of
section 368(b).
No gain or loss will be recognized by Sub2 on the transfer of its assets to Sub1 in
exchange for Sub1 stock and the assumption by Sub1 of any liabilities of Sub2
(sections 361(a) and 357(a)).
No gain or loss will be recognized by Sub2 on the transfer of Sub1 stock to
Sub2’s shareholder(s) (section 361(c)).
No gain or loss will be recognized by Sub1 on the receipt of the Sub2 assets in
exchange for Sub1 stock (section 1032(a)).
Sub1’s basis in each asset received from Sub2 will equal the basis of that asset
in the hands of Sub2 immediately before the Sub2 Merger (section 362(b)).
Sub1’s holding period in each asset received from Sub2 will include the period
during which Sub2 held the asset (section 1223(2)).
No gain or loss will be recognized by Sub2’s shareholder(s) on the receipt of
Sub1 stock in exchange for Sub2 stock (section 354(a)(1)).
The basis in the Sub1 stock received by Sub2’s shareholder(s) will equal the
basis of the Sub2 stock surrendered in exchange therefor (section 358(a)).
The holding period in the Sub1 stock received by Sub2’s shareholder(s) will
include the holding period of the Sub2 stock surrendered in exchange therefor,
provided the Sub2 stock was held as a capital asset on the date of the exchange
(section 1223(1)).
Sub1 will succeed to and take into account the items of Sub2 described in
section 381(c), subject to the conditions and limitations specified in sections 381,
382, 383, and 384 and the regulations thereunder.

The Sub6 Note and Sub4 Note Distributions (Step 8)

The distribution of the Sub6 Note by Sub6 to Sub1 will be treated as a
distribution to which section 301 applies, subject to the provisions of §§1.1502-
13(f)(2) and 1.1502-32.
PLR-114464-09 24
The distribution of the Sub4 Note by Sub4 to Sub1 will be treated as a
distribution to which section 301 applies, subject to the provisions of §§1.1502-
13(f)(2) and 1.1502-32.

The Sub4 Spin-Off (Step 10)

No gain or loss will be recognized by Sub1 on the distribution of the stock of
Sub4 in the Sub4 Spin-Off (section 355(c)(1)).
No gain or loss will be recognized by (and no amount will be included in the
income of) ForeignSub4 on the receipt of the stock of Sub4 in the Sub4 Spin-Off
(section 355(a)(1)).
The aggregate basis of the Sub1 stock and the Sub4 stock in the hands of
ForeignSub4 immediately after the Sub4 Spin-Off will equal the aggregate basis
of the Sub1 stock held by ForeignSub4 immediately before the Sub4 Spin-Off,
allocated between the stock of Sub1 and Sub4 in proportion to the fair market
value of each immediately following the Sub4 Spin-Off in accordance with
§1.358-2 (section 358(a)(1), (b)(2) and (c) and §1.358-1(a)).
The holding period of the Sub4 stock received by ForeignSub4 will include the
period during which ForeignSub4 held the Sub1 stock on which the Sub4 Spin-
Off is made, provided the Sub1 stock is held as a capital asset on the date of the
Sub4 Spin-Off (section 1223(1)).
Earnings and profits will be allocated between Sub1 and Sub4 in accordance
with section 312(h) and §§1.312-10(b) and 1.1502-33(e)(3).

The Sub6 Spin-Off (Step 11)

No gain or loss will be recognized by Sub1 on the distribution of the stock of
Sub6 in the Sub6 Spin-Off (section 355(c)(1)).
No gain or loss will be recognized by (and no amount will be included in the
income of) ForeignSub4 on the receipt of the stock of Sub6 in the Sub6 Spin-Off
(section 355(a)(1)).
The aggregate basis of the Sub1 stock and the Sub6 stock in the hands of
ForeignSub4 immediately after the Sub6 Spin-Off will equal the aggregate basis
of the Sub1 stock held by ForeignSub4 immediately before the Sub6 Spin-Off,
allocated between the stock of Sub1 and Sub6 in proportion to the fair market
value of each immediately following the Sub6 Spin-Off in accordance with
§1.358-2 (section 358(a)(1), (b)(2) and (c) and §1.358-1(a)).
The holding period of the Sub6 stock received by ForeignSub4 will include the
period during which ForeignSub4 held the Sub1 stock on which the Sub6 Spin-
PLR-114464-09 25

Off is made, provided the Sub1 stock is held as a capital asset on the date of the
Sub6 Spin-Off (section 1223(1)).
Earnings and profits will be allocated between Sub1 and Sub6 in accordance
with section 312(h) and §§1.312-10(b) and 1.1502-33(e)(3).

The Sub5 Spin-Off (Steps 5 and 12)

The Sub5 Contribution, followed by the Sub5 Distribution, will qualify as a
reorganization under section 368(a)(1)(D). Sub1 and Sub5 will each be a “party
to a reorganization” within the meaning of section 368(b).
No gain or loss will be recognized by Sub1 on the Sub5 Contribution (sections
357(a), 361(a) and 361(b)(3)).
No gain or loss will be recognized by Sub5 on the Sub5 Contribution (section
1032(a)).
Sub5’s basis in each asset received in the Sub5 Contribution will equal the basis
of that asset in the hands of Sub1 immediately before the Sub5 Contribution
(section 362(b)).
Sub5’s holding period in each asset received in the Sub5 Contribution will include
the period during which Sub1 held the asset (section 1223(2)).
No gain or loss will be recognized by Sub1 on the Sub5 Distribution (section
361(c)).
No gain or loss will be recognized by (and no amount will be included in the
income of) ForeignSub4 on the Sub5 Distribution (section 355(a)(1)).
The aggregate basis of the Sub1 stock and the Sub5 stock in the hands of
ForeignSub4 immediately after the Sub5 Distribution will equal the aggregate
basis of the Sub1 stock held by ForeignSub4 immediately before the Sub5
Distribution, allocated between the stock of Sub1 and Sub5 in proportion to the
fair market value of each immediately following the Sub5 Distribution in
accordance with §1.358-2 (section 358(a)(1), (b)(2) and (c) and §1.358-1(a)).
The holding period of the Sub5 stock received by ForeignSub4 will include the
period during which ForeignSub4 held the Sub1 stock on which the Sub5
Distribution is made, provided the Sub1 stock is held as a capital asset on the
date of the Sub5 Distribution (section 1223(1)).
Earnings and profits will be allocated between Sub1 and Sub5 in accordance
with section 312(h) and §§1.312-10(a) and 1.1502-33(e)(3).
PLR-114464-09 26
```
                                 CAVEATS
```

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter, including the federal income tax consequences of steps 1 and 2. Specifically, no opinion is expressed regarding the following:

To the extent not otherwise specifically ruled upon above, the adjustments to
earnings and profits or deficits in earnings and profits, if any, in any of the
transactions to which section 367 applies.
To the extent not otherwise specifically ruled upon above, any other
consequences under section 367 on any internal restructuring transaction in this
ruling letter.
Whether any or all of the above-referenced foreign corporations are PFICs within
the meaning of section 1297(a). If it is determined that any such corporations are
PFICs, no opinion is expressed with respect to the application of sections 1291
through 1298 to the proposed transactions. In particular, in a transaction in
which gain is not otherwise recognized, regulations under section 1291(f) may
require gain recognition notwithstanding any other provisions of the Code.

In addition, no opinion is expressed regarding: (i) whether the distributions described above satisfy the business purpose requirement of §1.355-2(b) of the Income Tax Regulations (the regulations); (ii) whether the distributions are used principally as a device for the distribution of the earnings and profits of the distributing company or the controlled companies or both (see section 355(a)(1)(B) of the Internal Revenue Code (the Code) and §1.355-2(d) of the regulations); and (iii) whether the distributions are part of a plan (or a series of related transactions) pursuant to which one or more persons will acquire directly or indirectly stock representing a fifty percent (50%) or greater interest in the distributing company or the controlled companies (see section 355(e) of the Code and §1.355-7 of the regulations).

PROCEDURAL STATEMENTS

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

A copy of this letter must be attached to any income tax return to which it is relevant. 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 the letter ruling.
PLR-114464-09
27

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,

Thomas I. Russell
Senior Counsel, Branch 5
(Corporate)

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