PLR 201107003: Corporate reorganizations and liquidations receive requested tax treatment

Plain-English summary

The IRS ruled on a multi-step restructuring involving foreign and domestic corporations, a partnership, a liquidation, a reorganization, stock exchanges, redemptions, and a later merger. The ruling treats the conversion of a domestic subsidiary into a disregarded entity as a complete liquidation under IRC § 332 and gives the requested nonrecognition and carryover-basis consequences. It also treats the conversion of the partnership into Newco as a type F reorganization and the integrated Newco stock exchange, redemptions, and merger as a type A reorganization. The ruling addresses the related distributions, stock basis, holding periods, tax attributes, and recognition of boot. The conclusions depend on the taxpayer's facts and representations, including the stated business purposes and continuity requirements.

Ruling snapshot

• Question: What are the federal income tax consequences of the proposed corporate conversions, reorganizations, stock transactions, liquidations, and merger?
• Outcome: Approved.
• Key authorities: IRC §§ 302, 332, 334, 337, 354, 356, 357, 358, 361, 362, 368, 381, 382, 383, 384, 897, 1032, and 1223; Treas. Reg. §§ 1.1502-13, 1.1502-32, 1.368-1, 1.368-2, 1.381(a)-1, and 301.7701-3; Rev. Ruls. 83-142, 96-29, and 2001-46.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201107003
Third Party Communication: None
Release Date: 2/18/2011
Date of Communication: Not Applicable
Index Number: 368.01-00, 368.06-00,
332.00-00
Person To Contact:
------------------------, ID No. ------------- ------------------------------------------------ Telephone Number:
-------------
---------------------
------------------
Refer Reply To:
--------------------------------------
CC:CORP:4
------------------------------
PLR-132633-10
Date:
November 03, 2010

Legend

Foreign Parent = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 1 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 2 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 3 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 4 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 5 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 6 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 7 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 8 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
PLR-132633-10
2

-------------------------------------------------------------------------------------
Sub 9 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Sub 10 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 11 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 12 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 13 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 14 = -------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 15
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-----------------------

Sub 16 = -------------------------------------------------------------------------------------
------------------------------------------------

Sub 17 = -------------------------------------------------------------------------------------
------------------------------------------------

Merger Sub = -----------------------------

Target = -------------------------------------------------------------------------------------
-------------------------------

Newco = ------------------

Date 1 = -----------------------

Date 2 = ------------------
PLR-132633-10
3

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

Date 4 = ------------------

Date 5 = ------------------

Date 6 = ------------------

Date 7 = -----------------

Date 8 = -----------------

Date 9 = --------------------

Date 10 = --------------------

Date 11 = ----------------------

Date 12 = ----------------------

Date 13 = ----------------------

Date 14 = ----------------------

Date 15 = ----------------------

Date 16 = ----------------------

State = -------------

Country = ---------------------

b = ----

c = --

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

e = ----

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

g = -----------------
PLR-132633-10
4

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

i = ---------------

j = ---------------

k = --------------

m = ---------------

n = -------------------

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

q = ---------------

r = --------------

s = --------

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

u = --------------

v = ---------------

w = --------

x = --------------

y = --------

z = --------------

aa = --------

bb = -----------------

cc = ---------------

dd = ---------

ee = -----------------
PLR-132633-10
5

ff = ----

gg = ---------------

Business A = ---------------------------------------------

Business B = -------------------------------------

Stock Exchange = ---------------------------------

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

This letter responds to your August 9, 2010 request for rulings regarding certain federal income tax consequences of a series of transactions. The information submitted in that request and in later correspondence is summarized below.

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.

Summary of Facts

Foreign Parent, a foreign corporation, directly owns all of the issued and outstanding shares of Sub 1, a disregarded entity for U.S. federal income tax purposes, and indirectly owns all of the issued and outstanding shares of Sub 2, a foreign corporation.

Sub 1 owns all of the issued and outstanding shares of Sub 3, a disregarded entity, and Sub 4, a foreign corporation.

Sub 3 directly owns all of the issued and outstanding shares of Sub 5, a disregarded entity. Sub 5 owns approximately ff percent of the issued and outstanding shares of Sub 6, a domestic corporation.

Sub 4 owns all of the issued and outstanding shares of Sub 7, a foreign corporation. Sub 7 owns all of the issued and outstanding shares of Sub 8 and Sub 9, both of which are disregarded entities for U.S. federal income tax purposes.
PLR-132633-10
6

Prior to the Proposed Transaction (defined below), Sub 9 and Sub 8 owned b and c percent, respectively, of the issued and outstanding interests in Sub 10, a State partnership that is regarded as a corporation for U.S. federal income tax purposes.

Sub 10 was the common parent of a group of affiliated corporations that joined in filing a U.S. consolidated income tax return. Sub 10 owned all of the issued and outstanding shares of Sub 11, a domestic corporation. Prior to the Proposed Transaction (defined below), Sub 11 owed Sub 2 approximately $d. In addition, prior to the Sub 10 Capital Contribution (described below), Sub 11 owes Sub 10 $dd.

Sub 11 owned all of the issued and outstanding stock of Sub 12, Sub 13, Sub 14, and Sub 15, all of which are domestic corporations. In addition, Sub 11 owned all of the issued and outstanding interests in Sub 16 and Sub 17, both disregarded entities. Sub 12, Sub 13, Sub 14, Sub 15, and their subsidiaries, and Sub 17 engaged in the conduct of Foreign Parent’s Business A (collectively, the “Business A Subsidiaries”).

Sub 16 owned approximately e percent of the issued and outstanding shares of Sub 6 (the “Old Sub 6 Shares”). Sub 16 acquired the Old Sub 6 Shares on Date 1, as part of a reorganization described under § 368 (the “Sub 6 Acquisition”). Prior to the Sub 6 Acquisition, Foreign Parent and its direct and indirect subsidiaries sold the Business B assets in the U.S. and used the proceeds to pay down debt.

Proposed Transaction

For what have been represented as valid business purposes, the following steps have been proposed (collectively, the “Proposed Transaction”):

    1. On Date 2, Sub 8 transferred its c percent interest in Sub 10 to Sub 7 in
  exchange for f.

    2. On Date 3, Sub 2 assigned $g of its receivable from Sub 11 (the “Sub 11
  Receivable”) to Sub 7 and Sub 9 in proportion to their partnership interests in
  Sub 10 in exchange for notes containing identical interest terms issued by Sub 7
  and Sub 9 (the “Note Exchange”).

    3. On Date 3, Sub 7 and Sub 9 contributed the Sub 11 Receivable acquired in the
  Note Exchange to the capital of Sub 10 in exchange for an additional amount of
  Sub 10 interests equal to the value of the Sub 11 Receivable (the “Sub 11 Note
  Contribution”).

    4. On Date 3, Sub 15 and Sub 13 declared a dividend of $h and $i, respectively, to
  Sub 11. Sub 15 and Sub 13 paid the declared dividend by assuming $h and $i of
  Sub 11’s payable to Sub 2 (the “Sub 15 and Sub 13 Assumptions”). The Sub 15
  and Sub 13 Assumptions constituted a full novation.

PLR-132633-10 7

5. On Date 4, Sub 12 acquired all the shares of Sub 13, Sub 14, Sub 15, and all of
 the interests in Sub 17 from Sub 11 for $j, settled by the issuance of a single
 share and an assumption of $k of Sub 11’s payable to Sub 2.

6. On Date 5, Sub 11 sold all of the shares of Sub 12 to Sub 7 in exchange for $gg
 (the “Sub 11 Sale”).

7. On Date 6, Sub 11 converted into a State LLC (“Sub 11 LLC”) pursuant to state
 law (the “Sub 11 Conversion”).

8. On Date 7, Sub 12 contributed all of the shares of Sub 13 to the capital of
 Sub 15.

9. On Date 9, Sub 7 and Sub 9 contributed $m and $n notes, respectively, to the
 capital of Sub 10 (the “Sub 10 Capital Contribution”).

10. On Date 10, Sub 10 used the proceeds from the Sub 10 Capital Contribution to
  acquire e percent of the issued and outstanding shares of Sub 6 from Sub 16
  (the “Sub 16 Sale”).

11. On Date 11, Sub 10 distributed Sub 11 LLC and its $ee receivable from Sub 11
  LLC to Sub 7 and Sub 9 in proportion to their partnership interests (the “Sub 10
  Distribution”). On Date 3, the Sub 11 Receivable was a $g receivable. After
  Date 3, but prior to Date 11, the Sub 11 Receivable was netted with a payable
  owed to Sub 11 LLC (previously Sub 11) from Sub 15, resulting in a remaining
  receivable from Sub 11 LLC to Sub 10 of $ee. Collectively, the Sub 10 Capital
  Contribution, the Sub 16 Sale, and the Sub 10 Distribution are referred to as the
  “Sub 6 Share Purchase”.

12. On Date 12, Sub 10 converted into a corporation, Newco, pursuant to State law
  (the “Sub 10 Reorganization”). Following the Sub 10 Reorganization, Newco will
  be a holding company and its sole asset will be the shares of Sub 6.

13. On Date 14, Sub 7 and Sub 9 transferred all of the issued and outstanding
  shares of Newco to Sub 6 in exchange for p newly registered Sub 6 shares,
  which represented approximately e percent of Sub 6’s issued and outstanding
  shares (the “New Sub 6 Shares”). The exchange of all of Newco’s shares for the
  New Sub 6 Shares is referred to hereinafter as the “Newco Stock Exchange”.

14. On Date 14, Sub 6 authorized the redemption of all the Sub 6 shares held by
  Sub 5, equal to q shares or ff percent of the total issued and outstanding shares
  of Sub 6, (the “Sub 5 Redemption”). Furthermore, Sub 6 authorized the
  redemption of r of the New Sub 6 Shares issued to Sub 7 and Sub 9 as part of
  the Newco Stock Exchange (the “Sub 7 Redemption”) (collectively, the Sub 5
  Redemption and the Sub 7 Redemption are referred to as the “Sub 6

PLR-132633-10 8

 Redemption 1”). In the Sub 6 Redemption 1, the New Sub 6 Shares were
 redeemed for cash equal to $s per share.

15. On Date 14, Sub 7 and Sub 9 placed t of the New Sub 6 Shares on the market in
  an underwritten secondary public offering and, in connection with this sale, sold
  an additional u shares under an underwriter over allocation option (the “Sub 6
  Sale”). In the Sub 6 Sale, v of the New Sub 6 Shares were sold at a price of $w
  per share and x of the New Sub 6 Shares were sold at a price of $y per share.

16. On Date 15, Merger Sub, a newly formed corporation wholly owned by Sub 6,
  merged with and into Target, an unrelated corporation (the “Target Merger”) with
  Target surviving. The Target Merger was intended to qualify as a reorganization
  under section 368. In the Target Merger, Sub 6 issued cc shares to the Target
  shareholders.

17. On Date 16, Foreign Parent exercised its option to cause Sub 6 to redeem
 approximately z of the New Sub 6 Shares for cash equal to $aa per share (the
 “Sub 6 Redemption 2”). As a result of the Target Merger, Sub 6 had bb shares
 issued and outstanding prior to the Sub 6 Redemption 2.

18. Newco will merge with and into a newly formed, disregarded entity, wholly owned
  by Sub 6 (“Merger Co”) pursuant to state law (the “Newco Merger”) as soon as
  practicable upon receipt of a private letter ruling from the Internal Revenue
  Service, but in no event later than 6 months after the receipt of such private letter
  ruling. The Newco 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 Newco Merger: (i) all of the assets and
  liabilities (except to the extent satisfied or discharged in the transaction) of
  Newco will become the assets and liabilities of a newly formed disregarded entity
  wholly owned by Sub 6; and (ii) Newco will cease its separate legal existence for
  all purposes.

                               Representations

PLR-132633-10 9

                    The Sub 15 and Sub 13 Assumptions

1. At all times beginning with the issuance of the Sub 11 Receivable, Sub 11
 treated the Sub 11 Receivable as debt for U.S. federal income tax purposes.

2. At all times beginning with the issuance of the Sub 11 Receivable, the Sub 11
 Receivable carried an interest rate that was comparable to the applicable federal
 rate.

3. At the time of the Sub 11 Note Contribution, the adjusted issue price of the
 Sub 11 Receivable equaled the debt’s fair market value.

                           The Sub 11 Conversion

1. Sub 10, on the date of the Sub 11 Conversion, owned all of the single
 outstanding class of stock of Sub 11.

2. The fair market value of the consideration received by Sub 10 for each share of
 Sub 11 stock was approximately equal to the fair market value of that stock.

3. No shares of any Sub 11 stock were redeemed during the three years preceding
 the Sub 11 Conversion.

4. Upon the Sub 11 Conversion, Sub 11 became a disregarded entity for U.S.
 federal income tax purposes.

5. Except for the Sub 6 Acquisition, Sub 11 has not acquired assets in any
 nontaxable transaction at any time, except for acquisitions occurring more than 3
 years prior to the date of the Sub 11 Conversion.

6. Except for the Sub 11 Sale, the Sub 6 Acquisition, and the sale of Business B, no
 assets of Sub 11 have been, or will be, disposed of by either Sub 11 or Sub 10
 except for dispositions in the ordinary course of business and dispositions
 occurring more than 3 years prior to the date of the Sub 11 Conversion.

7. Except for the Sub 10 Distribution, the Sub 11 Sale, and the Newco Stock
 Exchange, the Sub 11 Conversion will not be preceded or followed by the
 reincorporation in, or transfer or sale to, a recipient corporation (“Recipient”) of
 any of the businesses or assets of Sub 11, if persons holding, directly or
 indirectly, more than 20 percent in value of Sub 11 stock, also hold, directly or
 indirectly, more than 20 percent in value of the stock in Recipient. For purposes
 of this representation, ownership will be determined by application of the
 constructive ownership rules of section 318(a) of the Code as modified by section
 304(c)(3).

PLR-132633-10 10

8. Prior to the Sub 11 Conversion, no assets of Sub 11 were distributed in kind,
 transferred, or sold to Sub 10, except for transactions occurring in the ordinary
 course of business and transactions occurring more than 3 years prior to the
 Sub 11 Conversion.

9. The fair market value of the assets of Sub 11 exceeded its liabilities immediately
 before the Sub 11 Conversion.

10. Sub 10 is not an organization that is exempt from Federal income tax under
  section 501 or any other provision of the Code.

11. Except for a $dd payable and the Sub 11 Receivable owed from Sub 11 to
  Sub 10 that was extinguished upon the Sub 11 Conversion, there is no
  intercorporate debt existing between Sub 10 and Sub 11 and none has been
  cancelled, forgiven, or discounted, except for transactions that occurred more
  than 3 years prior to the date of the Sub 11 Conversion.

12. Sub 11 will report all earned income represented by assets that will be distributed
  to Sub 10 such as receivables being reported on a cash basis, unfinished
  development contracts, commissions due, etc.

13. All other transactions undertaken contemporaneously with, in anticipation of, in
  conjunction with, or in any way related to, the Sub 11 Conversion have been fully
  disclosed.

                         The Sub 6 Share Purchase

1. The steps comprising the Sub 6 Share Purchase occurred as part of a single
 overall plan.

2. The Sub 6 Share Purchase facilitated the creation of reserves for Sub 11 under
 Country law and created distributable reserves sufficient to satisfy the Country
 law requirement necessary to effectuate the distribution of Sub 11 LLC and to
 obtain a fair market value basis for Country tax purposes.

3. All events surrounding the Sub 6 Share Purchase will be treated by all parties as
 not having occurred for U.S. federal income tax purposes.

                         The Sub 10 Reorganization

1. Sub 7 and Sub 9 received solely Newco stock in the Sub 10 Reorganization.

2. The fair market value of the Newco stock received by Sub 7 and Sub 9 in the
 Sub 10 Reorganization was approximately equal to the fair market value of the
 Sub 10 stock surrendered in the exchange.

PLR-132633-10 11

3. Following the Sub 10 Reorganization, Sub 7 and Sub 9 owned all of the
 outstanding Newco stock and owned such stock solely by reason of their
 ownership of Sub 10 stock immediately prior to the Sub 10 Reorganization.

4. Immediately after the Sub 10 Reorganization, Newco held all the assets held by
 Sub 10 immediately prior to the Sub 10 Reorganization.

5. With regard to the assets that were transferred from Sub 10 to Newco in the
 Sub 10 Reorganization, the fair market value of the assets equaled or exceeded
 the sum of the liabilities (as determined under section 357(d)) that were assumed
 by Newco, if any.

6. All liabilities to which Sub 10 assets were subject to at the time of the Sub 10
 Reorganization and all liabilities of Sub 10 that were properly treated as being
 assumed by Newco in the Sub 10 Reorganization (as determined under section
 357(d)), are liabilities that were incurred by Sub 10 in the ordinary course of its
 business and are associated with the assets transferred from Sub 10 to Newco.

7. Foreign Parent, the indirect parent corporation of Sub 7, Sub 9 and Sub 10, will
 pay all of the expenses incurred in connection with the Sub 10 Reorganization.

8. Sub 10 is not under the jurisdiction of a court in a Title 11 or similar case within
 the meaning of section 368(a)(3)(A).

9. Sub 10 will not have been, at any time during the five-year period prior to the
 Sub 10 Reorganization, a U.S. real property holding corporation within the
 meaning of section 897(c)(2).

                          The Newco Stock Exchange

1. Sub 7 and the shareholders of Target did not collectively own stock representing
 80 percent of Sub 6 possesses combined voting power and 80 percent of the
 total number of shares of all other classes of stock. No other shareholders of
 Sub 6 contributed property for stock as part of the plan.

             The Newco Stock Exchange and the Newco Merger

1. The Newco Merger in combination with the Sub 7 Redemption, the Newco Stock
 Exchange, and the Sub 6 Redemption 2, is being carried out for the corporate
 business purpose of enabling Sub 6 to complete the Target Merger without
 causing a potential delisting of Foreign Parent stock under the Stock Exchange
 rules and to remove assets and liabilities of Sub 10 related to the Business A
 Subsidiaries prior to the Newco Stock Exchange.

PLR-132633-10 12

2. Continuity of proprietary interest in Newco will be preserved (within the meaning
 of Treas. Reg. § 1.368-1(e)).

3. Sub 6 has no plan or intention to sell or otherwise dispose of any of the assets of
 Newco acquired in the Newco Merger, except for dispositions made in the
 ordinary course of business or transfers described in section 368(a)(2)(C) or
 Treas. Reg. § 1.368-2(k).

4. The liabilities of Newco assumed in the Newco Merger and the liabilities to which
 the transferred assets of Newco were subject, were incurred by Newco in the
 ordinary course of its business.

5. Following the Newco Merger, Sub 6 will continue the historic business of Sub 10,
 or will use a significant portion of such historic business assets in an active trade
 or business.

6. Each party to the Newco Stock Exchange and the Newco Merger will pay its own
 expenses incurred in connection with the Newco Stock Exchange and the Newco
 Merger. The expenses attributable to the Foreign Parent side of the transaction
 will be paid by Foreign Parent.

7. There is no intercorporate indebtedness existing between Newco and Sub 6 that
 was issued, acquired, or will be settled at a discount.

8. Only one party, Newco, to the Newco Merger will be an investment company as
 defined in section 368(a)(2)(F)(iii) and (iv).

9. Newco is not under the jurisdiction of a court in a Title 11 or similar case within
 the meaning of section 368(a)(3)(A).

10. The fair market value of the assets of Newco transferred to Sub 6 will equal or
  exceed the sum of the liabilities assumed by Sub 6, plus the amount of liabilities,
  if any, to which the transferred assets are subject.

11. The fair market value of Sub 6 assets will exceed the amount of the liabilities of
  Sub 6 immediately after the transaction.

12. The fair market value of the acquiring stock and other consideration received by
  Newco’s shareholders will be approximately equal to the fair market value of the
  Newco stock surrendered in the exchange.

13. Except for the Sub 6 Redemption 1 and the Sub 6 Redemption 2, Sub 6 has no
  plan or intention to reacquire any of its stock issued in the transaction.

PLR-132633-10 13

14. Newco will not have been, at any time during the five-year period prior to the
  Sub 10 Reorganization, a U.S. real property holding corporation within the
  meaning of section 897(c)(2).

                                   Rulings

                    The Sub 15 and Sub 13 Assumptions

1. The Sub 15 and Sub 13 Assumptions qualified as distributions to Sub 11 with
 respect to the stock of Sub 15 and Sub 13, the amount of which will be excluded
 from the gross income of Sub 11 and will reduce the basis Sub 11 has in the
 Sub 15 and Sub 13 stock under Treas. Reg. §§ 1.1502-13(f)(2)(ii) and 1.1502-32.

                           The Sub 11 Conversion

1. The Sub 11 Conversion will constitute a complete liquidation of Sub 11 under
 § 332. Treas. Reg. § 301.7701-3.

2. No gain or loss will be recognized by Sub 10 on the deemed receipt of the assets
 and liabilities of Sub 11 as a result of the Sub 11 Conversion. Section 332(a).

3. The basis of each asset of Sub 11 deemed received by Sub 10 pursuant to the
 Sub 11 Conversion will equal the basis of that asset in the hands of Sub 11
 immediately before the Sub 11 Conversion. Section 334(b)(1).

4. The holding period of each asset of Sub 11 deemed received by Sub 10 in the
 Sub 11 Conversion will include the period during which Sub 11 held such asset.
 Section 1223(2).

5. Sub 10 will succeed to and take into account all of Sub 11’s tax attributes
 described in section 381(c) (section 381(a)(1) and Treas. Reg. § 1.381(a)-1).
 These items will be taken into account by Sub 10 subject to the conditions and
 limitations specified in sections 381, 382, 383 and 384 and the Regulations
 thereunder.

6. No gain or loss will be recognized by Sub 11 on the deemed distribution of its
 assets and liabilities as a result of the Sub 11 Conversion. Section 337(a).

                         The Sub 6 Share Purchase

1. The contribution of cash in the Sub 10 Capital Contribution to Sub 10 and
 subsequent distribution from Sub 10 of the same cash to Sub 7 as part of the
 Sub 6 Share Purchase will be disregarded for federal income tax purposes. Rev.
 Rul. 83-142, 1983-2 C.B. 68.

PLR-132633-10 14

                         The Sub 10 Reorganization

1. The Sub 10 Reorganization will qualify as a reorganization within the meaning of
 section 368(a)(1)(F). Sub 10 and Newco will each be “a party to the
 reorganization” within the meaning of section 368(b).

2. No gain or loss will be recognized by Sub 10 upon the transfer of all its assets to
 Newco in exchange for Newco stock and the assumption of liabilities. Sections
 361(a) and 357(a).

3. No gain or loss will be recognized by Newco upon the receipt of Sub 10’s assets
 in exchange for Newco stock. Section 1032(a).

4. Newco’s basis in each asset received from Sub 10 in the Sub 10 Reorganization
 will be the same as Sub 10’s basis in such asset immediately before the Sub 10
 Reorganization. Section 362(b).

5. Newco’s holding period for each asset received from Sub 10 in the Sub 10
 Reorganization will include the period during which such asset was held by
 Sub 10. Section 1223(2).

6. No gain or loss will be recognized by Sub 10 on the distribution of Newco stock
 to Sub 7. Section 361(c).

7. Sub 7 will recognize no gain or loss on its exchange of Sub 10 interests for
 Newco shares in the Sub 10 Reorganization. Section 354.

8. Sub 7’s basis in each share of Newco stock received in exchange for Sub 10
 stock will be equal to the basis of each Sub 10 interest treated as exchanged
 therefor. Section 358.

9. Sub 7’s holding period for the Newco stock received in the Sub 10
 Reorganization will include the holding period for the Sub 10 interests exchanged
 therefor, provided the Sub 10 interests were held as capital assets on the date of
 the exchange. Section 1223(1).

10. Newco will succeed to and take into account all of Sub 10’s tax attributes
  described in section 381(c) (section 381(a)(2) and Treas. Reg. § 1.381(a)-1).
  These items will be taken into account by Newco subject to the conditions and
  limitations specified in sections 381, 382, 383 and 384 and the Regulations
  thereunder.

11. The Newco Merger will not prevent the Sub 10 Reorganization from qualifying as
  a reorganization under section 368(a)(1)(F). Rev. Rul. 96-29, 1996-1 C.B. 50.

             The Newco Stock Exchange and the Newco Merger

PLR-132633-10 15

1. The Newco Stock Exchange, the Sub 7 Redemption, the Newco Merger, and the
 Sub 6 Redemption 2 will be integrated and treated as a transfer by Newco of all
 its assets, subject to liabilities, to Sub 6 in exchange for the New Sub 6 Shares
 and cash (as described above), and will constitute a reorganization within the
 meaning of section 368(a)(1)(A). Sub 6 and Newco will each be “a party to the
 reorganization” within the meaning of section 368(b). Rev. Rul. 2001-46, 2001-2
 C.B. 321.

2. No gain or loss will be recognized by Newco on the transfer of its assets and
 liabilities to Sub 6. Sections 361(a) and 357(a).

3. No gain or loss will be recognized by Sub 6 on the receipt of the Newco assets in
 exchange for the New Sub 6 Shares. Section 1032.

4. Sub 6’s basis in each asset received will equal the basis of that asset in the
 hands of Newco immediately before the transaction. Section 362(b).

5. Sub 6’s holding period for each asset received will include Newco’s holding
 period in such asset. Section 1223(2).

6. No gain or loss will be recognized by Newco on the distribution of the New Sub 6
 Shares to its shareholders. Section 361(c)(1).

7. No gain or loss will be recognized by Sub 7 upon the exchange of the Newco
 stock for Sub 6 stock, as described above. Section 354(a)(1).

8. The gain, if any, realized by Sub 7 upon receipt of Sub 6 stock, cash, and other
 property, will be recognized, but in an amount not in excess of the cash and other
 property received. Section 356(a)(1). The gain, if any, will not have the effect of
 the distribution of a dividend. Section 356(a)(2). The gain shall be treated as
 gain from the exchange of property. Section 356(a)(2); Commissioner v. Clark,
 489 U.S. 726 (1989). No loss will be recognized by Sub 7. Section 356(c).

9. Sub 7’s basis in the New Sub 6 Stock will be the same as the basis of the Newco
 shares surrendered in the Newco Stock Exchange decreased by the fair market
 value of the other property and the amount of any money received and increased
 by the amount of gain recognized by Sub 7 on such exchange. Section
 358(a)(1).

10. Sub 7’s holding period for the New Sub 6 Stock received in the Newco Merger
  will include the holding period for the Newco stock exchanged therefor, provided
  the Newco interests were held as capital assets on the date of the exchange.
  Section 1223(1).

PLR-132633-10 16

    11. Sub 6 will succeed to and take into account all of Newco’s tax attributes
   described in section 381(c) (section 381(a) and section 1.381(a)-1 of the Income
   Tax Regulations). These items will be taken into account by Sub 6 subject to the
   conditions and limitations specified in sections 381, 382, 383 and 384 and the
   Regulations thereunder.

                          Effect of the Sub 5 Redemption,

    1. The Sub 5 Redemption will be treated as a distribution in full payment in
  exchange for stock owned by Sub 5 as provided in section 302(a).

                                       Caveat

   Except as expressly provided herein, no opinion is expressed or implied

concerning the federal income tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

                                    Procedural

  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.

     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,


                                   _____________________________
                                   Lewis K Brickates
                                   Branch Chief, Branch 4
                                   (Corporate)