Basis increases for acquired partnership interests were amortizable

Plain-English summary

A publicly traded partnership converted to corporate form and transferred interests in lower-tier partnerships that held an intangible subject to section 197's anti-churning rules. The transfer produced section 743(b) basis increases for a new corporation or another partnership. Although the immediate transferors and transferees were related, the IRS analyzed the adjustments at the partner level. It ruled that the increases were amortizable to the extent they related to lower-tier interests previously acquired from unrelated principals or treated as acquired by public investors after the intangible entered the partnership. The ruling was conditioned on the taxpayer proving how much ownership changed through public trading and issuances.

Ruling snapshot

• Question: Were section 743(b) basis increases allocated to an anti-churning intangible amortizable after the publicly traded partnership's corporate conversion?
• Outcome: Approved for interests previously acquired from the principals or by public investors, subject to proof of the ownership changes.
• Key authorities: IRC §§ 197(f)(9), 743(b), and 754; Treas. Reg. §§ 1.197-2(g)(3) and 1.197-2(h)(12); Rev. Rul. 87-115.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201906002 Third Party Communication: None
Release Date: 2/8/2019 Date of Communication: Not Applicable
Index Numbers: 197.00-00
Person To Contact:
------------------------------ ---------------------------, ID No. ---------------
------------------------------------- -----------------
-------------------- Telephone Number:
-------------------------- ----------------------
--------------- Refer Reply To:
---------------------------------- CC:ITA:7
PLR-114627-18
Date:
October 26, 2018

Re: Request for a Private Letter Ruling Under § 197

LEGEND

Partnership1 = ----------------------------

Partnership2 = --------------------------------------------------

Partnership3 = ----------------------------------------

Partnership4 = --------------------------------------------

Partnership5 = ------- -------------------------------------------

Partnership6 = --------------------------

Partnership7 = ----------------------------------------

Corporation1 = ----------------------------------------------------

Corporation2 = ------------------------------

NewCo1 = ---------------------------

NewCo2 = -------------------------------------------
PLR-114627-18 2

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

Principals = --------------------------------------------------------------------------------

Intangible Asset = -----------------------------------

A = -------------------------------

B = ------- ----------------

C = ---------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
-------------------------
-----------------------------------------------------
D = ------- -----------------------

E = --------------------------------------------------------------------------------

-

F = ------- -----------------------

G = --------------------------------

H = ---------------------------------------------------------------------------------

I = ------- -----------------------------------------

J = ---------------------

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

Date2 = ---------------------------
PLR-114627-18 3

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

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

Year1 = -------

Year2 = -------

Exchange = -------------------------------------

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

   This letter ruling responds to a letter dated April 25, 2018, and subsequent

correspondence, submitted by Partnership1, Corporation1, Partnership2, Partnership3,
NewCo1, and NewCo2 (collectively, “Taxpayer”). Taxpayer is requesting a ruling
regarding the federal income tax consequences of certain transactions under § 197 of
the Internal Revenue Code.

FACTS

    Taxpayer represents the facts are as follows:

   Partnership1, a publicly traded partnership, is a State limited partnership that is

managed by Partnership1’s general partner, G, and classified as a partnership for
federal income tax purposes. Partnership1 indirectly owns E through a tiered holding
company structure. Specifically, Partnership1 owns (i) all of the outstanding stock of
Coporation1, (ii) an interest in Partnership2, (iii) an interest in Partnership3, and (iv)
other interests.

  Corporation1, a State corporation, is classified as a corporation for federal

income tax purposes and owns (i) an interest in Partnership4, (ii) an interest in
Partnership2, and (iii) other interests.

  Partnership2, a State limited partnership, is classified as a partnership for federal

income tax purposes. Partnership2 owns an interest in Partnership3.

    Partnership3 is an F limited partnership that is classified as a partnership for

federal income tax purposes. Partnership3’s assets include general partner interests in
funds that are expected to produce qualifying income under § 7704(c). Partnership3
and Partnership4 directly and indirectly own C. Partnership3 and Partnership4
collectively own interests in all A and have the exclusive rights to sponsor future B.
Partnership3 and Partnership4 are each responsible for the formation, operation, and
management of current or future B.
PLR-114627-18 4

    Partnership6 and Partnership7 own, directly and indirectly through Partnership5,

interests in Partnership3 and Partnership4 that the Principals have the right to exchange
for the common units of Partnership1 (the D). Partnership7 owns, indirectly through
Partnership5, Principals’ rights to receive distributions attributable to H from
Partnership3 and Partnership4.

   The Intangible Asset is the right to any H issued by an existing or future A that is

expected to produce qualifying income under § 7704(c). On Date1, Partnership5
contributed the Intangible Asset in the formation of Partnership3. Taxpayer represents
that the Intangible Asset is a § 197(f)(9) intangible in the hands of Partnership3 before
the conversion of Partnership1 to a corporation.

   Each of these transactions is described below.

Formation of Partnership3

    The following describes the manner in which Partnership1 and Partnership5

acquired their respective interests in Partnership3. On Date1, J was a disregarded
entity of Partnership1 before the following transactions occurred:

   1. On Date1, Partnership5 contributed (i) investments in A and H that were
      expected to produce qualifying income under § 7704(c), and (ii) the Intangible
      Asset to J, in exchange for an interest in J.

   2. Also on that date, Partnership1 contributed investments in A and cash to J in
      exchange for interests in J.

As a result of Partnership5’s contribution, J became classified as a partnership for
federal income tax purposes (Partnership3). This transaction qualified for non-
recognition under § 721(a).

Principals Transactions

    Principals own the remaining interests in Partnership3 and Partnership4 indirectly

through a tiered partnership structure consisting of Partnership6 and Partnership7,
through an intermediate, Partnership5. Partnership1 and Partnership2 periodically have
acquired interests in Partnership3 from Principals as a result of Principals exercising
their respective D, beginning on Date2. The following steps describe the relevant
transactions that occur when a Principal exercises their D:

   1. Partnership5 distributes Partnership3 interests to Partnership6 in a
      distribution that does not result in a recognition of gain or loss under § 731(a).

PLR-114627-18 5

   2. Partnership6 distributes the Partnership3 interests that it received in Step 1,
      and interests in Partnership4, to the Principal who exercised their D in a
      distribution that does not result in a recognition of gain or loss under § 731(a).

   3. The Principal transfers the Partnership3 interest to one or both of
      Partnership1 and Partnership2 and the Partnership4 interests to Corporation2
      in exchange for cash or Partnership1 common units.

Taxpayer represents that no Principal exercised their D in connection with, or as part of
a plan that included, the formation of Partnership3.

Public Trading of Limited Partner Interests of Partnership1

   Since Year2, limited partnership interests of Partnership1 have been publicly

traded on the Exchange. In a letter dated July 31, 2018, Taxpayer represents, subject
to confirmation by ongoing diligence, Taxpayer reasonably estimates that as of Date3,
through public trading and issuances of limited partnership interests, 95 percent or more
of the economic interests in Partnership1 have changed ownership since Partnership1
acquired its interest in Partnership3 in Year1.

Conversion of Partnership1 to a Corporation (“Transaction”)

  On Date4, Partnership1 converted to a State corporation in a non-taxable

transaction for federal income tax purposes. The steps taken to complete the
Transaction are as follows:

   1. Partnership1 transfers all of its assets to a new State corporation, NewCo2, in
      exchange for stock of NewCo2. NewCo2 is classified as a corporation for
      federal income tax purposes.

   2. Subsequent to Partnership1’s contribution to NewCo2, Partnership1 converts
      under State law to a corporation (NewCo1). NewCo1 is classified as a
      corporation for federal income tax purposes.

   In this Transaction, Partnership1 transfers all of its interests in Partnership3 and

Partnership2 to NewCo2. Taxpayer represents that these transfers cause actual and
deemed transfers of Partnership3 interests resulting in increases to the tax basis of the
Intangible Asset for the benefit of NewCo2 or Partnership2 under § 743(b).

   Taxpayer makes the following additional representations:

  1. Before the Transaction, the Intangible Asset is a § 197(f)(9) intangible that is

not amortizable under the anti-churning rules of § 197(f)(9) and § 1.197-2(h) of the
Income Tax Regulations in the hands of Partnership3.
PLR-114627-18 6

     2. Since Date1, Partnership3 has been the only direct user of the Intangible

Asset.

  3. Partnership5 has never been related to Partnership1 or its predecessor, or

Partnership2, within the meaning of § 197(f)(9)(C)(i) and § 1.197-2(h)(6).

     4. Partnership1 has had a § 754 election in effect since its inception.

   5. The transferor and transferee of any actual or deemed transfer of interests in

Partnership3 as a result of the Transaction will be related within the meaning of §
197(f)(9)(C)(i) and § 1.197-2(h)(6) immediately before and after the transaction.

RULING REQUESTED

   Taxpayer has requested a ruling that the increases to the tax basis of the

Intangible Asset, a §197(f)(9) intangible, under § 743(b) for the benefit of NewCo2 or
Partnership2, that result from the Transaction will be amortizable under § 197(a) to the
extent those basis adjustments relate to interests in Partnership3 that were (i) acquired
from the Principals, or (ii) indirectly acquired by public investors after the formation of
Partnership3.

LAW AND ANALYSIS

  Section 197(a) provides that a taxpayer shall be entitled to an amortization

deduction with respect to any amortizable § 197 intangible. The amount of such
deduction shall be determined by amortizing the adjusted basis (for purposes of
determining gain) of such intangible ratably over the 15-year period beginning with the
month in which such intangible was acquired.

   Section 197(b) provides that except as provided in § 197(a), no depreciation or

amortization deduction shall be allowable with respect to any amortizable § 197
intangible.

  Section 197(c)(1) provides that for purposes of § 197, except as otherwise

provided in § 197, the term “amortizable § 197 intangible” means any § 197 intangible
(A) which is acquired by the taxpayer after [August 10, 1993], and (B) which is held in
connection with the conduct of a trade or business or an activity described in § 212.

   Section 197(c)(2) provides that the term “amortizable § 197 intangible” shall not

include any § 197 intangible (A) which is not described in § 197(d)(1)(D), (E), or (F), and
(B) which is created by the taxpayer.
PLR-114627-18 7

   Section 197(c) shall not apply if the intangible is created in connection with a

transaction (or series of related transactions) involving the acquisition of assets
constituting a trade or business or substantial portion thereof.

   Section 197(c)(3) provides that, for the exclusion of intangibles acquired in

certain transactions, see § 197(f)(9) (anti-churning rules).

   Section 197(f)(9)(A) provides that, for purposes of § 197, the term “amortizable

§ 197 intangible” shall not include any § 197 intangible which is described in
§ 197(d)(1)(A) or (B) (or for which depreciation or amortization would not have been
allowable but for § 197) and which is acquired by the taxpayer after [August 10, 1993],
if:

   (i)     the intangible was held or used at any time after July 25, 1991, and on or
           before [August 10, 1993] by the taxpayer or a related person,

   (ii)    the intangible was acquired from a person who held such intangible at any
           time on or after July 25, 1991, and on or before [August 10, 1993], and, as
           part of the transaction, the user of such intangible does not change, or

   (iii)   the taxpayer grants the right to use such intangible to a person (or a
           person related to such person) who held or used such intangible at any
           time on or after July 25, 1991, and on or before [August 10, 1993].

   For purposes of § 197(f)(9)(A), the determination of whether the user of property

changes as part of a transaction shall be determined in accordance with regulations
prescribed by the Secretary.

   Section 197(f)(9)(C) provides that for purposes of § 197(f)(9) a person is related

to any person if the related person bears a relationship to such person specified in §
267(b) or § 707(b)(1), or the related person and such person are engaged in trades or
businesses under common control (within the meaning of § 41(f)(1)(A) and (B). In
applying § 267(b) or § 707(b)(1), “20 percent” shall be substituted for “50 percent”. A
person shall be treated as related to another person if such relationship exists
immediately before or immediately after the acquisition of the intangible involved.

  Section 197(f)(9)(E) provides that with respect to any increase in the basis of

partnership property under §§ 732, 734, or 743, determinations under § 197(f)(9) shall
be made at the partner level and each partner shall be treated as having owned and
used such partner’s proportionate share of the partnership assets.

   Section 1.197-2(g)(3) provides that any increase in the adjusted basis of a § 197

intangible under …§ 743(b) (relating to the optional adjustment to the basis of
partnership property after transfer of a partnership interest) is treated as a separate §
197 intangible. For purposes of determining the amortization period under § 197 with
PLR-114627-18 8

respect to the basis increase, the intangible is treated as having been acquired at the
time of the transaction that causes the basis increase, except as provided in § 1.743-
1(j)(4)(i)(B)(2) (dealing with an increase in the basis of the item of the partnership’s
recovery property under § 743(b) that is attributable to § 704(c) built-in gain when the
partnership elects to use the remedial allocation method).

   Section 1.197-2(h)(1)(i) provides that this paragraph (h) applies to § 197(f)(9)

intangibles. For this purpose, § 197(f)(9) intangibles are goodwill and going concern
value that was held or used at any time during the transition period and any other § 197
intangible that was held or used at any time during the transition period and was not
depreciable or amortizable under prior law.

    Section 1.197-2(h)(1)(ii) provides that the purpose of the anti-churning rules of §

197(f)(9) and § 1.197-2(h) is to prevent the amortization of § 197(f)(9) intangibles unless
they are transferred after the applicable effective date in a transaction giving rise to a
significant change in ownership or use. Special rules apply for purposes of determining
whether transactions involving partnerships give rise to a significant change in
ownership or use. See § 1.197-2(h)(12). The anti-churning rules are to be applied in a
manner that carries out their purpose.

  Section 1.197-2(h)(6)(i) provides, in pertinent part, that a person is related to

another person for purposes of § 1.197-2(h) if the person bears a relationship to that
person that would be specified (A) in § 267(b) (determined without regard to § 267(e)),
and by substitution, § 267(f)(1), if those sections were amended by substituting 20
percent for 50 percent or (B) in § 707(b)(1) if that section were amended by substituting
20 percent for 50 percent.

   Section 1.197-2(h)(6)(ii) provides that a person is treated as related to another

person for purposes of § 1.197-2(h) if the relationship exists, in the case of a single
transaction, immediately before or immediately after the transaction in which the
intangible is acquired.

    Section 1.197-2(h)(12)(i) provides that in determining whether the anti-churning

rules apply to any increase in the basis of a § 197(f)(9) intangible under …§ 743(b), the
determinations are made at the partner level and each partner is treated as having
owned and used the partner’s proportionate share of partnership property. In
determining whether the anti-churning rules apply to any transaction under another
section of the Internal Revenue Code, the determinations are made at the partnership
level, unless under § 1.701-2(e) the Commissioner determines that the partner level is
more appropriate.

   Section 1.197-2(h)(12)(v)(A) provides, generally, that the anti-churning rules do

not apply to an increase in the basis of a § 197 intangible under § 743(b) if the person
acquiring the partnership interest is not related to the person transferring the partnership
PLR-114627-18 9

interest. In addition, the anti-churning rules do not apply to an increase in the basis of a
§ 197 intangible under § 743(b) to the extent that . . .

(2) The partnership interest being transferred was acquired after the partnership
acquired the § 197(f)(9) intangible, provided -

   (i) The § 197(f)(9) intangible was acquired by the partnership after August 10,
   1993, and is not amortizable with respect to the partnership;

   (ii) The partnership interest being transferred was held after the partnership
   acquired the § 197 intangible by a person or persons (the post-contribution
   person or persons) other than the person transferring the partnership interest or
   persons who were related to the person transferring the partnership interest; and

   (iii) The acquisition of such interest by the post-contribution person or persons
   was not part of a transaction or series of related transactions in which the person
   transferring the partnership interest or persons related to the person transferring
   the partnership interest acquired such interest.

   Section 1.197-2(h)(12)(v)(B) provides that, solely for purposes of § 1.197-

2(h)(12)(v)(A)(1) and (2), a partner who acquires an interest in a partnership in
exchange for a contribution of property to the partnership is deemed to acquire a pro
rata portion of that interest in the partnership from each person who is a partner in the
partnership at the time of contribution based on each such partner’s proportionate
interest in the partnership.

    Rev. Rul. 87-115, 1987-2 C.B. 163, states that when an upper-tier partnership

has a § 754 election in effect, the transfer of an interest in the upper-tier partnership is
treated as a transfer of an interest in the upper-tier partnership’s interest in the lower-tier
partnership for purposes of § 743. Such an election shall apply with respect to all
distributions of property by the partnership and to all transfers of interests in the
partnership during the taxable year when such election was filed and all subsequent
years, unless revoked by the partnership, subject to § 1.754-1(c).

   Section 754 provides that if a partnership files an election in accordance with

regulations prescribed by the Secretary, the basis of partnership property shall be
adjusted …in the case of a transfer of a partnership interest, in the manner provided in §

743. Such an election shall apply with respect to all distributions by the property by the
     partnership and to all transfers of interests in the partnership during the taxable year
     when such election was filed and all subsequent years, unless revoked by the
     partnership, subject to § 1.754-1(c).

     Section 743(b) provides, in part, that in the case of a transfer of an interest in a
     partnership by sale or exchange, a partnership with respect to which the election
     provided in § 754 is in effect shall increase the adjusted basis of the partnership
     PLR-114627-18 10

property by the excess of the basis to the transferee partner of his interest in the
partnership over his proportionate share of the adjusted basis of the partnership
property.

   Of the requirements for amortization under § 197, only the anti-churning rules are

in question in this case. Special rules are provided for partnerships in § 1.197-2(h)(12),
and specific rules for § 743(b) basis adjustments are provided in § 1.197-2(h)(12)(v).

    On Date1 (after August 10, 1993), Partnership3 was formed by Partnership5 and

Partnership1 in a transaction that qualified for non-recognition under § 721(a).
Partnership5 contributed the Intangible Asset to Partnership3 in exchange for its interest
in Partnership3, and Partnership1 contributed cash and other assets in exchange for its
interest in Partnership3. Partnership3 has used the Intangible Asset since then in its
trade or business. Under § 1.197-2(h)(12)(v)(B), each of the partners of Partnership3
was deemed to acquire their interest in Partnership3 from the other, and each was
deemed to acquire a proportional interest in the assets of Partnership3. Since the
Intangible Asset was not amortizable in Partnership5’s hands, it is also not amortizable
in the hands of Partnership3. Section 197(f)(2) and § 1.197-2(g)(2). This will continue
to be true after the transactions subject to this ruling occur.

   This ruling addresses the § 743(b) adjustments that are allocable to the

Intangible Asset that result from the transfer of Partnership2 and Partnership3 interests
to NewCo2, a newly formed corporation in a non-taxable transaction. Each § 743(b)
adjustment results in a separate intangible asset that is analyzed under § 1.197-
2(h)(12)(v) at the partner level. Sections 1.197-2(g)(3) and 1.197-2(h)(12)(i). Partners
are treated as directly owning and using their proportionate share of partnership assets.
Section 197(f)(9)(E).

    In this case, the anti-churning rules do not apply to a § 743(b) adjustment if one

of two tests is met, either (i) the transferee is not related to the transferor or (ii) the
requirements of § 1.197-2(h)(12)(v)(A)(2) are met. The basis adjustments do not satisfy
the first test because the transferor and the transferee of any actual or deemed transfer
of Partnership3 interests as a result of the Transaction will be related within the
meaning of § 197(f)(9)(C)(i) and § 1.197-2(h)(6) immediately before and after the
Transaction. Thus, any transferee entitled to a basis adjustment will be related to the
transferor for purposes of the anti-churning rules. Therefore, the basis adjustments will
be amortizable under § 197(a) only if the requirements of § 1.197-2(h)(12)(v)(A)(2) are
met.

Principals Transactions

  In the case of the interests in Partnership3 that Partnership1 and Partnership2

acquired in the Principals transactions, the Partnership3 interests that are transferred to
NewCo2 were originally owned by Partnership5 and distributed to the exercising
PLR-114627-18 11

Principal through a series of non-recognition transactions. Taxpayer has represented
that no Principal exercised their D in connection with, or as part of a plan that included,
the formation of Partnership3.

  With respect to the interests in Partnership3 acquired by Partnership1 and

Partnership2 from the Principals, the requirements of § 1.197-2(h)(12)(v)(A)(2) are met
because:

   (i) The Principals transactions occurred after Partnership3 acquired the Intangible

Asset and, therefore, the interests in Partnership3 that Partnership1 and Partnership2
acquired in the Principals transactions occurred after Partnership3 acquired the
Intangible Asset. Also, Partnership3 acquired the Intangible Asset after August 10,
1993, and the Intangible Asset is not amortizable in the hands of Partnership3;

   (ii) The Principals’ interests in Partnership3 that are being transferred were held

after Partnership3 acquired the Intangible Asset by Partnership5, a person other than
Partnership1 or Partnership2. Further, Taxpayer has represented that Partnership5 has
never been related to Partnership1 or its predecessor, or Partnership2, within the
meaning of § 197(f)(9)(C)(i) and § 1.197-2(h)(6); and

    (iii) The acquisition of the interests in Partnership3 by Partnership5 was not part

of a transaction or series of related transactions in which Partnership1 and Partnership2
acquired its Partnership3 interest from the Principals. That is, the exercise of the D
occurred in transactions independent from the formation of Partnership3.

Public Trading

   With respect to the interests in Partnership3 acquired by Partnership1 upon the

formation of Partnership3 on Date1, the requirements of § 1.197-2(h)(12)(v)(A)(2) are
met because:

   (i) Partnership1 acquired its interest in Partnership3 after Partnership3 acquired

the Intangible Asset. Also, Partnership3 acquired the Intangible Asset after August 10,
1993, and the Intangible Asset is not amortizable in the hands of Partnership3; and

   (ii) In its letter dated July 31, 2018, Taxpayer represents, subject to confirmation

by ongoing diligence, Taxpayer reasonably estimates that as of Date3, through public
trading and issuances of limited partnership interests, --- percent or more of the
economic interests in Partnership1 have changed ownership since Partnership1
acquired its interests in Partnership3 in Year1.

   As stated in Rev. Rul. 87-115, when an upper-tier partnership has a § 754

election in effect, any § 743(b) adjustment resulting from the deemed transfer is
segregated and allocated solely to the transferee of the upper-tier partnership interest.
PLR-114627-18 12

Further, with respect to any increase in the basis of partnership property under § 743, a
partnership is treated as an aggregate of its owners under the anti-churning rules.
Section 197(f)(9)(E).

    Applying § 1.197-2(h)(12)(i), for purposes of § 1.197-2(h)(12)(v)(A)(2)(iii), the

public owners of Partnership1 are treated as acquiring interests in Partnership3 when
each public owner purchased an interest in Partnership1, subsequent to the formation
of Partnership3 in Year1. Because the public owners of Partnership1 acquired interests
in Partnership3 after those interests were held by unrelated owners in transactions
independent from the formation of Partnership3, § 1.197-2(h)(12)(v)(A)(2)(ii) and (iii) are
satisfied for those acquisitions.

    Based on Taxpayer’s representation in a letter dated July 31, 2018 that,

Taxpayer reasonably estimates that as of Date3, which is one business day before Date
4, through public trading and issuances of limited partnership interests, --- percent or
more of the economic interests in Partnership1 have changed ownership since
Partnership1 acquired its interests in Partnership3 in Year1, the increases to the tax
basis of the Intangible Asset for the benefit of Newco2 or Partnership2 under § 743(b)
resulting from Partnership1’s transfer of interests in Partnership3 to Newco2 are
amortizable under § 197(a) to the extent those interests were treated as previously
acquired by public investors since the formation of Partnership3 on Date1.

CONCLUSIONS

     Based solely on the facts and representations submitted and the law and

analysis as set forth above, we rule that the increases to the tax basis of the Intangible
Asset, a §197(f)(9) intangible, under § 743(b) for the benefit of NewCo2 or Partnership2,
that result from the Transaction will be amortizable under § 197(a) to the extent those
basis adjustments relate to interests that (i) were previously acquired from the Principals
or (ii) were treated as previously acquired by public investors subsequent to the
formation of Partnership3 on Date1.

   Except as expressly set forth above, no opinion is expressed or implied

concerning the federal tax consequences of the facts described above under any other
provision of the Code or regulations. Specifically, no opinion is expressed or implied
concerning the federal income tax treatment of any transactions described in this letter,
including the Transaction that Taxpayer represents occurred on Date4.

  This letter ruling is conditioned upon Taxpayer demonstrating the extent that the

ownership of Partnership1’s interests changed between Date1 and Date3.

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

representations submitted by Taxpayer accompanying penalty of perjury statements
executed by appropriate parties. While this office has not verified any of the material
PLR-114627-18 13

submitted in support of this letter ruling request, all material is subject to verification on
examination.

    A copy of this letter ruling must be attached to any federal income tax return to

which it is relevant. A copy is enclosed for that purpose. Alternatively, a taxpayer filing
its federal income tax return electronically may satisfy this requirement by attaching a
statement to the return that provides the date and control number of the letter ruling.

  This letter ruling is directed only to the taxpayers who requested it. Section

6110(k)(3) provides that it may not be used or cited as precedent.

  In accordance with the power of attorney, we are sending a copy of this letter to

Taxpayer’s authorized representatives. We are also sending a copy of this letter to the
appropriate operating division director.

                                    Sincerely,

                                    s/Kathleen Reed

                                    KATHLEEN REED
                                    Branch Chief, Branch 7
                                    Office of Associate Chief Counsel
                                    (Income Tax & Accounting)

Enclosures (2):
copy of this letter
copy for section 6110 purposes