PLR 1033010: IRS allowed a regulated investment company to use a distribution procedure

Plain-English summary

A regulated investment company intended to maintain its qualification and regularly distribute its earnings and profits. It had one class of common stock that was not publicly traded on an established securities market. The IRS ruled that Revenue Procedure 2010-12 would apply to the taxpayer's proposed distributions, even though the stock was not publicly traded. The IRS did not rule on the taxpayer's qualification as a regulated investment company or on its stock valuation method.

Ruling snapshot

• Question: Could the taxpayer apply Revenue Procedure 2010-12 to proposed distributions despite having stock that was not publicly traded?
• Outcome: Approved
• Key authorities: IRC § 852; Rev. Proc. 2010-12.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201033010 [Third Party Communication:
Release Date: 8/20/2010 Date of Communication: Month DD, YYYY]
Index Number: 301.00-00
Person To Contact:
---------------------------- ------------------------, ID No. -------------
------------- Telephone Number:
------------------------------------------------ --------------------
-------------------------------------- Refer Reply To:
---------------------------------------- CC:CORP:4
PLR-110192-10
Date:
May 11, 2010

Legend

Taxpayer = -------------------------------------------------------------------------------------------------
-----------------------

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

X = ---------------

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

  This letter responds to your March 3, 2010, request for rulings as to the federal

income tax consequences of the Proposed Distributions (defined below). The
information received in that request is summarized below.

   The rulings contained in this letter are based upon facts and representations

submitted by the taxpayer and accompanied by a penalty 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

    Taxpayer represents that it qualifies as a regulated investment company (RIC)

under the Internal Revenue Code (the “Code”), that it intends to maintain such
qualification as a RIC, and that it regularly distributes its earnings and profits as required
under section 852. Taxpayer has one class of common stock (the “Common Stock”)
outstanding, which is not publicly traded on an established securities market. As of
Date1, Taxpayer had #X shares of Common Stock issued and outstanding. Taxpayer

PLR-110192-10 2

intends to make one or more distributions with respect to its Common Stock (the
Proposed Distributions) that it represents will meet all of the requirements of Section
3.02 of Rev. Proc. 2010-12, 2010-3 I.R.B. 302, except that its stock is not publicly
traded on an established securities market.

                                     Rulings

    Based solely on the information provided and the representations made, we rule

as follows: the Internal Revenue Service will apply Rev. Proc. 2010-12, supra, to the
Proposed Distributions.

                                     Caveats

   We express no opinion about the tax treatment of the Proposed Distributions

under other provisions of the Code and regulations or the tax treatment of any condition
existing at the time of, or effects resulting from, the Proposed Distribution that is not
specifically covered by the above rulings. In particular, no opinion is expressed with
regard to whether Taxpayer qualifies as a RIC under subchapter M of the Code.
Furthermore, no opinion is expressed as to the reasonableness of taxpayer’s stock
valuation method.

                             Procedural Statements

    This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)

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. In accordance with
the power of attorney on file with this office, a copy of this letter is being sent to your
authorized representatives.

                                  Sincerely,


                                  _____________________________
                                  T. Ian Russell
                                  Senior Counsel, Branch 5
                                  Office of Associate Chief Counsel
                                  (Corporate)