PLR 1024028: IRS approved a merger and confirmed cooperative treatment

Plain-English summary

The IRS ruled on a restructuring in which two corporations merged into a newly renamed cooperative corporation, followed by a recapitalization and a contribution of nonmember business assets to a subsidiary. The merger qualified as a Type A reorganization, and the ruling addressed nonrecognition, basis, holding period, and other tax attributes for the participating corporations and shareholders. The IRS also concluded that the surviving corporation operated on a cooperative basis under subchapter T because it provided democratic member control, subordinated capital, and allocated net earnings to members according to patronage. The ruling did not express an opinion on several related matters, including certain dividends, notes, the recapitalization, and the name change.

Ruling snapshot

• Question: Do the proposed merger and related restructuring qualify for specified nonrecognition treatment, and does the surviving entity operate on a cooperative basis?
• Outcome: Approved
• Key authorities: IRC §§ 1381, 354, 356, 357, 358, 361, 362, 368, and 381 through 384

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201024028 Third Party Communication: None
Release Date: 6/18/2010 Date of Communication: Not Applicable
Person To Contact:
Index Number: 368.01-00, 1381.02-00 -----------------, ID No. -------------
Telephone Number:
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------------------------------------------------- Refer Reply To:
----------------------------- CC:CORP:2
------------------------ PLR-140639-09
------------------------ Date:
March 09, 2010

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LEGEND:

Old Acquiring = -------------------------------------------------------
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New Acquiring = ----------------------------------------
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Target1 = --------------------------------------------------------------
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Target2 = --------------------------------------------------------
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NewCo = --------------------------------------

FC1 = --------------------------------
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FC2 = ------------------------------------
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PLR-140639-09 2

FC3 = ------------------------------
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FC4 = ----------------------------------------------
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FC5 = --------------------------------------------
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FC6 = ---------------------------------------
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FC7 = ------------------------------------------------
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FC8 = --------------------------------------------------------------------------------

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Class AA = ---------------------------------------------------------------------------------

Class BB = ---------------------------------------------------------------------------------

Class DD = ---------------------------------------------------------------------------------

Class EE = ---------------------------------------------------------------------------------

Class UU = ---------------------------------------------------------------------------------

City B = --------------------------

State X = ----------------

State Y = -------------

Country E = ------------------
PLR-140639-09 3

Country F = ------------

$U = ---------------

$V = ---------------

$W = --------

$X = -------

$Y = ----

$Z = -------------

a = -----

b = -----

c = ---

d = --------------

e = --------------

f = --------------

g = --------

h = ----------------

i = --------

j = --------

k = -----

l = --------

m = --------

n = --------

o = ----
PLR-140639-09 4

p = ------------------------

q = --------

r = ------

s = ----

t = ---------------------------

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

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

Date3 = ---------------------------

Date4 = ---------------------------

Date5 = ---------------------------

Date6 = ---------------------------

Date7 = --------------------------

Date8 = -------------------------

Date9 = -------------------

Dear -----------------:

This is in response to a letter, dated September 8, 2009 in which rulings are requested
as to the federal income tax consequences of a proposed transaction. The information
submitted in that request and in later correspondence is summarized below.

The rulings contained in this letter are based on facts and representations submitted by
the taxpayer and accompanied by penalties of perjury statement executed by an
appropriate party. This office has not verified any of the materials 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

PLR-140639-09 5

Old Acquiring, a corporation incorporated in State X, operated as a non-exempt
cooperative under Subchapter T of the Internal Revenue Code (Code). Target1 and
Target2 were Subchapter C corporations incorporated in State Y.

Old Acquiring and Target2 each operated ongoing businesses, marketing and
distributing r for sale to customers in the U.S. Target1 operated an ongoing business,
marketing and distributing r on behalf of Old Acquiring’s non-members.

Old Acquiring, Target1, and Target2 each maintained its respective books and records
on the accrual method of accounting and had a taxable year ending on Date9. The
principal office of each was located in City B.

FC1, FC2, FC3, and FC4 are Country E corporations. FC5, FC6, FC7, and FC8 are
Country F corporations.

FC1 owned a shares, FC2 owned b shares, and FC4 owned c shares of the common
stock of Old Acquiring (Existing Common Stock).

FC1 owned d shares, FC2 owned e shares, and FC3 owned f shares of the outstanding
common stock of Target1. FC1 owned g shares, FC2 and FC3 each owned i shares of
Class BB common stock of Target 2. FC5 and FC6 each owned j shares, FC7 owned l
shares, and FC8 owned m shares of Class AA common stock of Target2 (Class AA and
Class BB are collectively referred to as Target2 stock).

FC1, FC2, and FC4 were co-op members of Old Acquiring, and each held a qualified
per-unit retained certificate in the amount of $U, $V, and $Z, respectively. None of the
members had a U.S. trade or business.

                                TRANSACTION

For what are represented to be valid business reasons, the following steps have been
undertaken:

1. On Date1, Old Acquiring formed NewCo, a State X corporation, and made a capital
   contribution of $X in exchange for k shares.

2. On Date2, Old Acquiring amended its Articles of Incorporation to change its name to
   New Acquiring (Name Change) and to authorize the issuance of the following: h
   shares of each of the following classes: Class UU common stock, Class EE common
   stock and Class DD preferred stock. Class UU and Class EE stock each have the
   same right to dividends and to assets on liquidation. Subject to the Board of
   Directors’ approval, Class UU stock is convertible into Class EE stock and vice-
   versa. Both classes may only be issued to shareholders, who are also members of
   New Acquiring. Each class votes separately. Each holder of Class UU or Class EE
   PLR-140639-09 6

stock is entitled to only one vote regardless of the number of shares owned. Class
DD preferred stock is non-voting, redeemable preferred stock with a par value of $Y
and an annual dividend cumulatively payable at a rate of $W per share. Upon
liquidation, Class DD is entitled to a liquidation preference equal to $Y plus any
accrued dividends. The Existing Common Stock remained authorized and
outstanding.

3. On Date3, FC3 caused FC4 to distribute the following: (i) c shares in the Existing
   Common Stock and a qualified per-unit retained certificate in the amount of $Z in
   New Acquiring; and (ii) f shares in Target1.

4. On Date4, Target1 and Target2 each declared a distribution equal to its respective
   net earnings for taxable year ending Date5. Each made its respective distribution in
   the form of newly issued notes to its respective shareholders (collectively referred to
   as Notes1).

5. On Date 6, Target1, Target2, and New Acquiring entered into a merger agreement
   providing for the merger of Target1 and Target2 into New Acquiring, with New
   Acquiring as the surviving corporation. In the merger, FC1, FC2 and FC3 received,
   in exchange for their stock in Target1 and Target2, Class EE common stock, and
   FC5, FC6, FC7, and FC8, in exchange for their stock in Target2, received Class UU
   common stock. FC5, FC6, and FC8 also received Class DD preferred stock as part
   of the exchange of their Target2 stock. Class EE and Class UU were issued based
   on the shareholder’s country of incorporation. The merger was effected under the
   laws of State X (“Merger”).

6. Contemporaneous with the Merger, FC1, FC2, and FC3 each surrendered its
   Existing Common Stock and per-unit retained certificate in New Acquiring in
   exchange for shares of Class EE stock and promissory notes (Notes2). FC2 and
   FC3 also received Class DD preferred stock as part of the exchange. Notes2
   provide a term of o years and bear compound interest payable semi-annually at an
   annually adjusted rate equal to p. The Existing Common Stock was cancelled and
   became authorized, but unissued (“Recapitalization”). New Acquiring also
   contributed net assets related to its non-member business to Newco.

7. On Date 7, New Acquiring declared and subsequently distributed patronage
   dividends for the taxable year ending Date5, payable in the form of s% in promissory
   notes and the remainder in cash to FC1, FC2 and FC4.

                            REPRESENTATIONS
   

The following representations have been made in connection with the transaction:
PLR-140639-09 7

1. The Merger qualified as a statutory merger under applicable law of State X.
   Pursuant to the plan of Merger, by operation of law of State X, the following occurred
   simultaneously: (i) all of the assets held by Target1 and Target2 and all of the
   liabilities of Target1 and Target2 (except to the extent satisfied or discharged in the
   transaction) became assets and liabilities of New Acquiring; and (ii) Target1 and
   Target2 ceased their separate legal existence.

2. The Recapitalization qualified as a reorganization under § 368(a)(1)(E) of the
   Internal Revenue Code.

3. The Name Change qualified as a reorganization under § 368(a)(1)(F).

4. None of the shareholders of Target1 and Target2 has any plan or intention to sell or
   otherwise dispose of any of the New Acquiring stock received in the Merger.

5. The fair market value of New Acquiring stock actually or constructively received by
   each shareholder of Target1 and Target2 was approximately equal to the fair market
   value of Target1 or Target2 stock surrendered in the exchange.

6. At least 40 percent of the proprietary interest in Target1 and Target2 was
   exchanged actually or constructively for New Acquiring stock and was preserved
   (within the meaning of § 1.368-1(e)(1) of the Treasury Regulations)

7. Neither Target1 nor Target2 was nor will have been, at any time during the five-year
   period prior to the Merger, a U.S. real property holding corporation within the
   meaning of § 897(c)(2).

8. Neither New Acquiring nor any person related (within the meaning of § 1.368-
   1(e)(4)) to New Acquiring has any plan or intention to reacquire any of the Class EE
   or Class UU stock received in the Merger.

9. New Acquiring has no plan or intention to sell or otherwise dispose of any of the
   assets of each Target1 or Target2 acquired in the Merger, except for dispositions
   made in the ordinary course of business or transfers described in § 368(a)(2)(C) or
   § 1.368-2(k).

10. Except for Notes1, the liabilities of Target1 and Target2 assumed (within the
    meaning of § 357(d)) by New Acquiring were incurred by Target1 and Target2 in the
    ordinary course of their respective businesses and are associated with the assets
    transferred.

11. Following the Merger, New Acquiring has continued and will continue the historic
    business of Target1 and Target2 or has used or will use a significant portion of such
    historic business assets in a business.
    PLR-140639-09 8

12. The parties to the Merger paid their respective expenses, if any, incurred in
    connection with the Merger.

13. No intercorporate indebtedness existed between Target1 and New Acquiring or
    Target2 and New Acquiring other than that arising in the normal course of business
    and none was issued, acquired, or settled at a discount.

14. None of the parties to the Merger were investment companies as defined in
    §§ 368(a)(2)(F)(iii) and (iv).

15. Immediately before the Merger, the total fair market value of Target1’s and Target2's
    assets transferred to New Acquiring each exceeded the sum of: (i) the amount of
    liabilities assumed (as determined under § 357(d)) by New Acquiring in connection
    with the Merger; (ii) the amount of liabilities owed to New Acquiring by either Target1
    or Target2 that was discharged or extinguished in connection with the Merger; and
    (iii) the amount of any money and the fair market value of any other property (other
    than stock permitted to be received under § 361(a) without the recognition of gain)
    received by Target1 or Target2 in connection with the Merger.

16. The fair market value of New Acquiring’s assets exceeded its liabilities immediately
    after the Merger.

17. Neither Target1 nor Target 2 was under the jurisdiction of a court in a title 11 or
    similar case within the meaning of § 368(a)(3)(A).

18. Class DD preferred stock constituted nonqualified preferred stock within the
    meaning of § 351(g)(2).

19. The declaration and payment of patronage dividends for year ending Date5 were
    made in accordance with the provisions of subchapter T.

                   OPERATING ON A COOPERATIVE BASIS
    

Section 1381 of the Code provides that subchapter T shall apply to “any corporation
operating on a cooperative basis…” with certain exception not here relevant. Section
1.1381-1(a) states that Subchapter T of the Code “applies to any corporation operating
on a cooperative basis and allocating amounts to patrons on the basis of business done
with or for patrons.”

Rev. Rul. 93-21, 1993-1 C.B. 188, provides that the cooperative principles in Puget
Sound Plywood, Inc. v. Commissioner, 44 T.C. 305 (1965), acq. 1966-1 C.B. 3, provide
the basis for determining whether a corporation is operating on a cooperative basis for
purposes of subchapter T of the Code.
PLR-140639-09 9

In Puget Sound Plywood, three principles are described as fundamental to cooperative
operation: 1) subordination of capital; 2) democratic control by the members; and 3)
operation at cost, the vesting in and allocation among the members of all fruits and
increases arising from their cooperative endeavor.

Subordination of capital requires that control of the cooperative and ownership of the
pecuniary benefits arising from the cooperative’s business remains in the hands of the
member/patrons of the cooperative rather than with nonpatron equity investors in the
cooperative. The purpose of this limitation is to insure that the gains that accrue to the
cooperative from the business that it transacts with its patrons will largely or completely
inure to the benefit of those patrons rather than to its stockholders. To be operating on
a cooperative basis, a cooperative must limit the financial return with respect to its
equity capital. Puget Sound, 44 T.C. at 308. Stated differently, a cooperative may not
be operated for the purpose of paying a return on equity investments.

Democratic control of the cooperative, as envisioned in Puget Sound at 308, is typically
achieved by voting on a one-member, one-vote basis. The principle of democratic
control was further discussed in Etter Grain Co. v. United States, 462 F.2d 259, 263 (5th
Cir. 1972), in which the court noted that § 521 of the Code, regarding exempt
cooperatives, contemplates that the stock will be owned by the patrons of the
cooperative. That section, “envision(s) the exempt association organized according to a
model of a widely-based participatory democracy in which all the members are able to
exercise a franchise of equal strength.” Each member must have a single vote
regardless of the size of its investment or the amount of business it does with the
corporation.

The requirement of operation at cost is met if the cooperative’s net earnings or savings
are distributed to the cooperative’s patrons in proportion to the amount of business
conducted with them. This requirement relates to:

   the proportionate vesting in and allocation among the worker-members of all
   fruits and increases from their cooperative endeavor, is achieved through
   statutes, Bylaws, and contractual arrangements between the association and its
   members, whereby the elected officers of the associations are required to make
   periodic allocations of the same among the members in proportion to their active
   participation as workers. Puget Sound, at 308.

Rev. Rul. 70-481, 1970-2 C.B. 170, holds that a corporation supplying services to its
members at cost and making distributions to each member based on the value of
business done with each member was “operating on a cooperative basis” within the
meaning of §1381(a)(2).
PLR-140639-09 10

Rev. Rul. 72-36, 1972-1 C.B. 151, states that in accordance with fundamental
cooperative principles, the rights and interests of the members in the savings of a
cooperative should be determined in proportion to their business with the cooperative.
With respect to liquidating distributions, the Service has stated that the cooperative
principle of operation at cost requires that a cooperative’s Articles of Incorporation or
Bylaws obligate the cooperative to distribute its remaining assets upon liquidation to
both its current and former members in proportion to the value or quantity of business
that each did with the cooperative over some reasonable number of years.

Section 1382(b)(1) provides, in part, that in determining the taxable income of a
cooperative there shall not be taken into account amounts paid during the payment
period for the taxable year as patronage dividends to the extent paid in money, qualified
written notices of allocation or other property with respect to patronage occurring during
such taxable year and as per-unit retain allocations to the extent paid in money,
qualified per-unit retain certificates or other property with respect to marketing occurring
during such taxable year.

Section 1382(b)(1) and section 1.1381-2(b)(1) provide, in pertinent part, that there is
allowed as deduction from the gross income of any cooperative to which part 1 of
Subchapter T applies, amounts paid to patrons during the payment period for the
taxable year as patronage dividends to the extent that such amounts are paid in money,
qualified written notices of allocation, or other property (other than nonqualified written
notices of allocation). Section 1388(d) defines the term “nonqualified written notices of
allocation” as meaning a written notice of allocation other than a qualified written notice
of allocation, or a qualified check that is not cashed on or before the 90th day after the
close of the payment period for the taxable year.

Section 1382(d) of the Code provides, in part, that the payment period for any taxable
year is the period beginning with the first day of such taxable year and ending with the
fifteenth day of the ninth month following the close of such year.

Section 1388(a)(1) of the Code provides that the term “patronage dividend” means an
amount paid to a patron by a cooperative on the basis of the quantity or value of
business done with or done for such patron. Section 1388(a)(2) provides that a
“patronage dividend” is an amount paid “under an obligation” that must have existed
before the cooperative received the amount so paid. Section 1388(a)(3) provides that
“patronage dividend” means an amount paid to a patron that is determined by reference
to the net earnings of the corporation from business done with or for its patrons. That
section further provides that “patronage dividend” does not include any amount paid to a
patron to the extent that such amount is out of earnings other than from business done
with or for patrons. Section 1.1382-3(c)(2) of the regulations states that income derived
from sources other than patronage means incidental income derived from sources not
directly related to the marketing, purchasing, or service activities of the cooperative
association.
PLR-140639-09 11

Section 1388(f) of the Code defines the term “per-unit retain allocation” to mean any
allocation, by an organization to which part I of this subchapter applies, to a patron with
respect to products marketed for him, the amount of which is fixed without reference to
the net earnings of the organization pursuant to an agreement between the organization
and the patron.

Per-unit retain allocations may be made in money, property or certificates. Per-unit
retain allocations paid in money and in property are excludable or deductible under
§ 1382(b)(3). Per-unit retain allocations paid in certificates are deductible under
§ 1382(b)(3) if the certificates are qualified. If the certificates are nonqualified, the
cooperative is permitted a deduction under sections 1382(b)(4) (or a tax benefit figured
under section 1383) when the certificates are later redeemed.

For cooperatives that market products under pooling arrangements, section 1382(e) of
the Code provides that the patronage shall be treated as patronage occurring during the
taxable year the pool closes and that the marketing of products shall be treated as
occurring during any of the taxable years in which the pool is open.

Rev. Rul. 67-33, 1967-2 C.B. 299, provides that advances and payments made to
patrons while a pool is open are treated as per-unit retain allocations and the final
payment in settlement of a pool is treated as a patronage dividend.

Rev. Rul. 74-567, 1974-2 C.B. 174, provides that establishment of separate allocation
units does not violate the principle of “equitable allocation” since all patrons within each
of the allocation units are treated equally. If the cooperative operates two or more
different businesses on a cooperative basis, a separate accounting pool for each
business can be established in order to separately determine the net earnings of each
pool and to distribute the net earnings of each pool solely to the patrons that utilized the
service for which the pool was formed.

New Acquiring’s Bylaws provide that each Member-Shareholder shall be entitled to one
and only one vote on all member business that requires member approval as prescribed
by the Bylaws. Thus, the Bylaws satisfy the democratic control requirement for
cooperative operation.

Numerous provisions of New Acquiring’s Articles of Incorporation and Bylaws ensure
that it meets the requirement of subordination of capital. New Acquiring’s Articles of
Incorporation and Bylaws both have provisions that mandate that it operate on a
cooperative basis for the benefit of its Member-Shareholders. Specifically, t of the
Bylaws provides, in part, that in order to induce patronage and to assure that this
Cooperative will operate on a service-at-cost basis on all its transactions with its
members, the Cooperative is obligated to account on a patronage basis to all its
member patrons on an annual basis for all amounts received from business conducted
PLR-140639-09 12

with members on a patronage basis, over and above the cost of providing such
services. In other words, all net earnings of the cooperative are to be returned to the
member patrons in accordance with each member’s respective patronage transacted.
In addition, after dissolution distribution of remaining assets shall be distributed to all
member patrons on the basis of their amount of patronage with the cooperative. New
Acquiring will not have any nonpatron investors, nor does it plan to accept any
nonpatron investors. Thus, as structured, New Acquiring’s Articles of Incorporation and
Bylaws satisfy the subordination of capital requirement for cooperative operation.

New Acquiring’s Articles of Incorporation and Bylaws ensure that the net earnings or
savings are distributed to the Member-Shareholders in proportion the value of business
done with the corporation by the Member-Shareholder during the fiscal year, and
amounts so allocated shall be distributed within the payment period set for in section
1382(d) of the Code. Moreover, in carrying out the purpose and effect of New
Acquiring’s Bylaws, the cooperative will: (1) account on a patronage basis to all
Member-Shareholders for the amounts collected from such patrons in excess of the
cost of service; (2) make payment of all amounts collected in excess of cost from
Member Shareholders in the form of patronage dividends and allocated on a dollar
value basis; and (3) maintain books and records such that at the end of each fiscal year
the amount of capital furnished by patronage is clearly reflected and my be credited to
the Member-Shareholder’s account. Thus, the Articles of Incorporation and Bylaws
satisfy the operation at cost requirement for cooperative operation

                                    RULINGS

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

1. The Merger of New Acquiring, Target1, and Target2, as described above, qualifies
   as a reorganization within the meaning of § 368(a)(1)(A).

2. New Acquiring, Target1 and Target2 are each “a party to a reorganization” within the
   meaning of § 368(b).

3. No gain or loss is recognized by either Target1 or Target2 upon the transfer of its
   respective assets to New Acquiring and the assumption of the applicable Target's
   liabilities by New Acquiring in exchange solely for stock in New Acquiring (§§ 361(a),
   (b) and 357(a)).

4. No gain or loss is recognized by either Target1 or Target2 upon the transfer of stock
   in New Acquiring to its respective shareholders pursuant to the plan of
   reorganization. (§ 361(c)).
   PLR-140639-09 13

5. No gain or loss is recognized by New Acquiring on the acquisition of Target1's or
   Target2’s assets in exchange for the issuance of stock in New Acquiring (§ 1032(a)).

6. The basis that New Acquiring has in each asset received from Target1 and Target2
   is the same as the basis of such asset in the hands of Target1 or Target2, as
   applicable, immediately before the Merger (§ 362(b)).

7. No gain or loss is recognized by Target1 and Target2 shareholders on the exchange
   of Target1 or Target2 stock for Class EE or Class UU common stock, as applicable
   (§ 354(a)). Gain, but not loss is realized by applicable Target1 and Target2
   shareholders on the exchange of their common stock for Class DD preferred stock; if
   the exchange has the effect of a distribution of a dividend (as determined with the
   application of section 318(a)), then the gain is recognized as a dividend to the extent
   of Target1 or Target2 shareholders’ ratable share of the applicable corporation’s
   undistributed, accumulated earnings and profits after February 28, 1913, and the
   remainder is treated as a gain from the exchange of property. (§ 356(a) and (e)).

8. The basis of Class EE common stock or Class UU common stock received by
   Target1 and Target2 shareholders in the Merger, as applicable, is the same as the
   basis of the applicable Target1 or Target2 stock surrendered in the exchange as part
   of the Merger (§ 358(a)(1)) decreased by the fair market value of the Class DD
   preferred stock received in the Merger, if any. The basis of the Class DD preferred
   stock received by Target1 and Target2 shareholders is its fair market value as of
   Date6 (§ 358(a)(2)).

9. The holding period of Class EE and Class UU stock received by Target1 and
   Target2 shareholders in the Merger, as applicable, includes the period during which
   the exchanged Target1 or Target2 stock was held, provided the applicable stock
   was held as a capital asset on the date of the Merger (§ 1223(1)). The holding
   period of the Class DD preferred stock received by certain Target1 and Target2
   shareholders as part of the Merger begins as of Date6 (§ 1223(1)).

10. New Acquiring succeeds to and takes into account the items of Target1 and Target2
    described in § 381(c), subject to the provisions and limitations specified in §§ 381,
    382, 383, and 384 and regulations thereunder (§ 381(a)).

11. New Acquiring is operating on a cooperative basis within the meaning of §1381(a)(2)
    of the Code and is treated as a cooperative under subchapter T of the Code.

                                   CAVEATS
    

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item described above under other
provisions of the Internal Revenue Code or Income Tax Regulations, or the tax
treatment of any conditions existing at the time of, or effects resulting from, the
PLR-140639-09 14

transactions described above that are not specifically covered by the above rulings. We
specifically express no opinion regarding the tax treatment of:

1. the patronage dividends under the international provisions of the Code or any
   income tax treaty;

2. the declaration and payment of dividends by Target 1 and Target2 prior to the
   Merger, and the declaration and payment of the patronage dividends by New
   Acquiring after the Merger;

3. the issuance of Notes1 by Target1 and Target2 and the assumption of those
   instruments by New Acquiring;

4. the gain realized by applicable Target1 and Target2 shareholders on the
   exchange of their applicable common stock for Class DD preferred stock (see
   § 356(a)(2));

5. the transfer from FC4 to FC3 of: (i) c shares in Existing Common Stock and a
   qualified per-unit retained certificate in the amount of $Z in Old Acquiring and (ii) f
   shares in Target1;

6. the Recapitalization and the Name Change;

7. FC1, FC2 or FC3 regarding the Recapitalization.

                           PROCEDURAL MATTERS
   

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.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

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-140639-09 15

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

                                 Sincerely,



                                 Gerald B. Fleming
                                 Senior Technician Reviewer, Branch 2
                                 (Corporate)

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