Circular note transfers are treated as direct asset contributions
Apply this to your situation
This page covers one taxpayer's ruling from 2021, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.
Plain-English summary
A publicly traded parent planned a large internal restructuring to move assets and liabilities from foreign branches and disregarded entities to foreign corporate subsidiaries. The steps used asset sales for notes, followed by long chains of note contributions through related entities until the notes returned to the entities that issued them. The IRS ruled that each circular series would be disregarded for federal income tax purposes. Instead, the asset movements would be treated as 67 direct contributions through the corporate ownership chain, with each recipient treated as receiving the property it actually received. This significant-issue ruling did not decide the overall tax consequences of the restructuring or whether the transfers satisfied Section 482.
Ruling snapshot
- Question: How should circular note-transfer steps used to move foreign business assets through a corporate group be treated for federal tax purposes?
- Outcome: Approved as to the stated issue. The circular steps are disregarded and recast as direct property contributions.
- Key authorities: IRC § 351; Rev. Rul. 57-311; Rev. Rul. 77-191; Rev. Rul. 83-142; Rev. Proc. 2020-1 § 6.03
Full text (IRS public release)
Internal Revenue Service Department of the Treasury
Washington, DC 20224
Number: 202125001 Third Party Communication: None
Release Date: 6/25/2021 Date of Communication: Not Applicable
Index Number: 351.00-00
Person To Contact:
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---------------------------------------- Telephone Number:
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Refer Reply To:
---------------------------------- CC:CORP:4
----------------------------------------------- PLR-100120-21
Date:
March 31, 2021
LEGEND
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PLR-100120-21 4
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PLR-100120-21 5
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Dear --------------:
This letter responds to your authorized representatives' letter dated December 31, 2020,
requesting rulings on certain federal income tax consequences of a series of proposed
transactions described below (the "Proposed Transactions"). The Information provided
in that request and in subsequent correspondence is summarized below.
The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalties 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.
This letter is issued pursuant to section 6.03 of Rev. Proc. 2020-1, 2020-1 I.R.B. 1,
regarding rulings on one or more significant issues under sections 332, 351, 355, 368,
or 1036 of the Internal Revenue Code. The rulings contained in this letter only address
one or more discrete legal issues involved in the Proposed Transactions. This Office
expresses no opinion as to the overall tax consequences of the Proposed Transactions
or as to any issue not specifically addressed by the rulings below.
FACTS
Parent is a publicly traded domestic corporation that is the common parent of an
affiliated group of corporations that files a consolidated return for U.S. federal income
tax purposes. Parent owns all the stock of Sub 1, a domestic corporation.
Sub 1 owns all the stock of Sub 2, a domestic corporation.
Sub 2 owns all the stock of Sub 3, a domestic corporation. Sub 2 also owns all the
interests in LLC 1, a domestic eligible entity (within the meaning of Treas. Reg.
§ 301.7701-3(a)) that is disregarded as separate from its owner for U.S. federal income
PLR-100120-21 6
tax purposes (a “disregarded entity”). Sub 2 also owns an a% interest in DRE 1, a
Country A disregarded entity; LLC 1 owns the remaining b% interest in DRE 1.
Sub 3 owns all the interests in Sub 4, a domestic eligible entity classified as a
corporation. Sub 3 also owns all the interests in LLC 2, a domestic disregarded entity.
Sub 3 also owns a c% interest in DRE 2, a Country B disregarded entity; LLC 2 owns
the remaining d% interest in DRE 2. Sub 3 also owns all of the interests in DRE 3, a
Country C disregarded entity.
Sub 4 owns all the stock of Sub 5, a domestic corporation.
Sub 5 owns all the stock of Sub 6, a domestic corporation.
Sub 6 owns all the stock of FSub 1, a Country D eligible entity classified as a
corporation.
FSub 1 owns all of the interests in DRE 4, a Country D disregarded entity.
DRE 4 owns all of the interests in DRE 5, a Country D disregarded entity.
DRE 5 owns all the stock of FSub 2, a Country E eligible entity classified as a
corporation. DRE 5 also owns all of the interests in DRE 6, a Country F disregarded
entity; DRE 7, a Country G disregarded entity; and DRE 8, a Country A disregarded
entity. DRE 5 also owns an e% interest in DRE 9, a Country H disregarded entity; DRE
7 owns the remaining f% interest in DRE 9.
DRE 8 owns all of the interests in DRE 10, a Country A disregarded entity.
DRE 7 owns all the stock of FSub 3, a Country I eligible entity classified as a
corporation. DRE 7 also owns all of the interests in DRE 11, a Country G disregarded
entity; DRE 12, a Country J disregarded entity; and DRE 13, a Country C disregarded
entity.
DRE 13 owns all of the interests in DRE 14, a Country K disregarded entity and DRE
15, a Country L disregarded entity.
Parent also operates through branches. Sub 1 operates branches in certain countries
including Country C, Country F, Country G, Country H, Country I, Country J, Country K,
and Country L. LLC 2 operates branches in certain countries including Country E.
PROPOSED TRANSACTION
Parent will undertake the Proposed Transactions in order to transfer certain of the
assets and liabilities of certain foreign branches of Sub 1 and LLC 2, and DRE 1, DRE
2, and DRE 3 (the "Target Assets") to FSub1, FSub2, and FSub3.
PLR-100120-21 7
The steps of the Proposed Transactions that will occur are set forth below:
Sub 2 Restructuring
DRE 1 Restructuring
(i) On Date A, DRE 1 will sell its Target Assets to DRE 10 in exchange for a
note equal to the fair market value of the Target Assets of DRE 1
transferred ("Note 1").
(ii) DRE 1 will distribute Note 1 pro rata to Sub 2 and LLC 1, thereby
bifurcating Note 1 into Note 2 (distributed to Sub 2) and Note 3 (distributed
to LLC 1). LLC 1 will distribute Note 3 to Sub 2.
(iii) Sub 2 will contribute Notes 2 and 3 to Sub 3 as a contribution to capital.
(iv) Sub 3 will contribute Notes 2 and 3 to Sub 4 as a contribution to capital.
(v) Sub 4 will contribute Notes 2 and 3 to Sub 5 as a contribution to capital.
(vi) Sub 5 will contribute Notes 2 and 3 to Sub 6 as a contribution to capital.
(vii) Sub 6 will contribute Notes 2 and 3 to FSub 1 as a contribution to capital.
(viii) FSub 1 will contribute Notes 2 and 3 to DRE 4.
(ix) DRE 4 will contribute Notes 2 and 3 to DRE 5.
(x) DRE 5 will sell Notes 2 and 3 to DRE 8 in exchange for a new note (“New
Note”).
(xi) DRE 5 will contribute New Note to DRE 8.
(xii) DRE 8 will contribute Notes 2 and 3 to DRE 10.
Sub 3 Restructuring
DRE 2 Restructuring
(xiii) On Date B, Sub 3 will sell its c% interest in DRE 2 (the “DRE 2 Interest”)
to DRE 5 in exchange for a note equal to c% of the fair market value of the
Target Assets of DRE 2 ("Note 4"). Simultaneously, LLC 2 will sell its d%
interest in DRE 2 to FSub 1 in exchange for nominal cash.
(xiv) Sub 3 will contribute Note 4 to Sub 4 as a contribution to capital.
PLR-100120-21 8
(xv) Sub 4 will contribute Note 4 to Sub 5 as a contribution to capital.
(xvi) Sub 5 will contribute Note 4 to Sub 6 as a contribution to capital.
(xvii) Sub 6 will contribute Note 4 to FSub 1 as a contribution to capital.
(xviii) FSub 1 will contribute Note 4 to DRE 4.
(xix) DRE 4 will contribute Note 4 to DRE 5.
DRE 3 Restructuring
(xx) On Date E, Sub 3 will sell its interest in DRE 3 (the “DRE 3 Interest”) to DRE
7 in exchange for a note equal to the fair market value of the Target Assets
of DRE 3 ("Note 5").
(xxi) Sub 3 will contribute Note 5 to Sub 4 as a contribution to capital.
(xxii) Sub 4 will contribute Note 5 to Sub 5 as a contribution to capital.
(xxiii) Sub 5 will contribute Note 5 to Sub 6 as a contribution to capital.
(xxiv) Sub 6 will contribute Note 5 to FSub 1 as a contribution to capital.
(xxv) FSub 1 will contribute Note 5 to DRE 4.
(xxvi) DRE 4 will contribute Note 5 to DRE 5.
(xxvii) DRE 5 will contribute Note 5 to DRE 7.
Sub 1 Restructuring
Sub 1 Country C Branch Restructuring
(xxviii) On Date E, Sub 1 will sell the Target Assets of its Country C Branch (the
"Sub 1 Country C Branch") to DRE 13 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country C Branch
("Note 6").
(xxix) Sub 1 will contribute Note 6 to Sub 2 as a contribution to capital.
(xxx) Sub 2 will contribute Note 6 to Sub 3 as a contribution to capital.
(xxxi) Sub 3 will contribute Note 6 to Sub 4 as a contribution to capital.
(xxxii) Sub 4 will contribute Note 6 to Sub 5 as a contribution to capital.
(xxxiii) Sub 5 will contribute Note 6 to Sub 6 as a contribution to capital.
PLR-100120-21 9
(xxxiv) Sub 6 will contribute Note 6 to FSub 1 as a contribution to capital.
(xxxv) FSub 1 will contribute Note 6 to DRE 4.
(xxxvi) DRE 4 will contribute Note 6 to DRE 5.
(xxxvii) DRE 5 will contribute Note 6 to DRE 7.
(xxxviii) DRE 7 will contribute Note 6 to DRE 13.
Sub 1 Country G Branch Restructuring
(xxxix) On Date F, Sub 1 will sell the Target Assets of its Country G Branch (the
"Sub 1 Country G Branch") to DRE 11 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country G Branch
("Note 7").
(xl) Sub 1 will contribute Note 7 to Sub 2 as a contribution to capital.
(xli) Sub 2 will contribute Note 7 to Sub 3 as a contribution to capital.
(xlii) Sub 3 will contribute Note 7 to Sub 4 as a contribution to capital.
(xliii) Sub 4 will contribute Note 7 to Sub 5 as a contribution to capital.
(xliv) Sub 5 will contribute Note 7 to Sub 6 as a contribution to capital.
(xlv) Sub 6 will contribute Note 7 to FSub 1 as a contribution to capital.
(xlvi) FSub 1 will contribute Note 7 to DRE 4.
(xlvii) DRE 4 will contribute Note 7 to DRE 5.
(xlviii) DRE 5 will contribute Note 7 to DRE 7.
(xlix) DRE 7 will contribute Note 7 to DRE 11.
Sub 1 Country K Branch Restructuring
(l) On Date G, Sub 1 will sell the Target Assets of its Country K Branch (the
"Sub 1 Country K Branch") to DRE 14 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country K Branch
("Note 8").
(li) Sub 1 will contribute Note 8 to Sub 2 as a contribution to capital.
(lii) Sub 2 will contribute Note 8 to Sub 3 as a contribution to capital.
PLR-100120-21 10
(liii) Sub 3 will contribute Note 8 to Sub 4 as a contribution to capital.
(liv) Sub 4 will contribute Note 8 to Sub 5 as a contribution to capital.
(lv) Sub 5 will contribute Note 8 to Sub 6 as a contribution to capital.
(lvi) Sub 6 will contribute Note 8 to FSub 1 as a contribution to capital.
(lvii) FSub 1 will contribute Note 8 to DRE 4.
(lviii) DRE 4 will contribute Note 8 to DRE 5.
(lix) DRE 5 will contribute Note 8 to DRE 7.
(lx) DRE 7 will contribute Note 8 to DRE 13.
(lxi) DRE13 will contribute Note 8 to DRE 14.
Sub 1 Country L Branch Restructuring
(lxii) On Date H, Sub 1 will sell the Target Assets of its Country L Branch (the
"Sub 1 Country L Branch") to DRE 15 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country L Branch
("Note 9").
(lxiii) Sub 1 will contribute Note 9 to Sub 2 as a contribution to capital.
(lxiv) Sub 2 will contribute Note 9 to Sub 3 as a contribution to capital.
(lxv) Sub 3 will contribute Note 9 to Sub 4 as a contribution to capital.
(lxvi) Sub 4 will contribute Note 9 to Sub 5 as a contribution to capital.
(lxvii) Sub 5 will contribute Note 9 to Sub 6 as a contribution to capital.
(lxviii) Sub 6 will contribute Note 9 to FSub 1 as a contribution to capital.
(lxix) FSub 1 will contribute Note 9 to DRE 4.
(lxx) DRE4 will contribute Note 9 to DRE 5.
(lxxi) DRE 5 will contribute Note 9 to DRE 7.
(lxxii) DRE 7 will contribute Note 9 to DRE 13.
(lxxiii) DRE 13 will contribute Note 9 to DRE 15.
PLR-100120-21 11
Sub 1 Country H Branch Restructuring
(lxxiv) On Date D, Sub 1 will sell the Target Assets of its Country H Branch (the
"Sub 1 Country H Branch") to DRE 9 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country H Branch
("Note 10").
(lxxv) Sub 1 will contribute Note 10 to Sub 2 as a contribution to capital.
(lxxvi) Sub 2 will contribute Note 10 to Sub 3 as a contribution to capital.
(lxxvii) Sub 3 will contribute Note 10 to Sub 4 as a contribution to capital.
(lxxviii) Sub 4 will contribute Note 10 to Sub 5 as a contribution to capital.
(lxxix) Sub 5 will contribute Note 10 to Sub 6 as a contribution to capital.
(lxxx) Sub 6 will contribute Note 10 to FSub 1 as a contribution to capital.
(lxxxi) FSub 1 will contribute Note 10 to DRE 4.
(lxxxii) DRE 4 will contribute Note 10 to DRE 5.
(lxxxiii) DRE 5 will contribute e% of Note 10 to DRE 9.
(lxxxiv) DRE 5 will contribute f% of Note 10 to DRE 7.
(lxxxv) DRE 7 will contribute f% of Note 10 to DRE 9.
Sub 1 Country F Branch Restructuring
(lxxxvi) On Date D, Sub 1 will sell the Target Assets of its Country F Branch
(the "Sub 1 Country F Branch") to DRE 6 in exchange for a note equal to
the fair market value of the Target Assets of the Sub 1 Country F Branch
("Note 11").
(lxxxvii) Sub 1 will contribute Note 11 to Sub 2 as a contribution to capital.
(lxxxviii) Sub 2 will contribute Note 11 to Sub 3 as a contribution to capital.
(lxxxix) Sub 3 will contribute Note 11 to Sub 4 as a contribution to capital.
(xc) Sub 4 will contribute Note 11 to Sub 5 as a contribution to capital.
(xci) Sub 5 will contribute Note 11to Sub 6 as a contribution to capital.
(xcii) Sub 6 will contribute Note 11 to FSub 1 as a contribution to capital.
PLR-100120-21 12
(xciii) FSub 1 will contribute Note 11 to DRE 4.
(xciv) DRE 4 will contribute Note 11 to DRE 5.
(xcv) DRE 5 will contribute Note 11 to DRE 6.
Sub 1 Country J Branch Restructuring
(xcvi) On Date C, Sub 1 will sell the Target Assets of its Country J Branch (the
"Sub 1 Country J Branch") to DRE 12 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country J Branch
("Note 12").
(xcvii) Sub 1 will contribute Note 12 to Sub 2 as a contribution to capital.
(xcviii) Sub 2 will contribute Note 12 to Sub 3 as a contribution to capital.
(xcix) Sub 3 will contribute Note 12 to Sub 4 as a contribution to capital.
(c) Sub 4 will contribute Note 12 to Sub 5 as a contribution to capital.
(ci) Sub 5 will contribute Note 12 to Sub 6 as a contribution to capital.
(cii) Sub 6 will contribute Note 12 to FSub 1 as a contribution to capital.
(ciii) FSub 1 will contribute Note 12 to DRE 4.
(civ) DRE 4 will contribute Note 12 to DRE 5.
(cv) DRE 5 will contribute Note 12 to DRE 7.
(cvi) DRE 7 will contribute Note 12 to DRE 12.
Sub 1 Country I Branch Restructuring
(cvii) On Date I, Sub 1 will sell the Target Assets of its Country I Branch (the
"Sub 1 Country I Branch") to FSub 3 in exchange for a note equal to the
fair market value of the Target Assets of the Sub 1 Country I Branch
("Note 13").
(cviii) Sub 1 will contribute Note 13 to Sub 2 as a contribution to capital.
(cix) Sub 2 will contribute Note 13 to Sub 3 as a contribution to capital.
(cx) Sub 3 will contribute Note 13 to Sub 4 as a contribution to capital.
(cxi) Sub 4 will contribute Note 13 to Sub 5 as a contribution to capital.
PLR-100120-21 13
(cxii) Sub 5 will contribute Note 13 to Sub 6 as a contribution to capital.
(cxiii) Sub 6 will contribute Note 13 to FSub 1 as a contribution to capital.
(cxiv) FSub 1 will contribute Note 13 to DRE 4.
(cxv) DRE 4 will contribute Note 13 to DRE 5.
(cxvi) DRE 5 will contribute Note 13 to DRE 7.
(cxvii) DRE 7 will contribute Note 13 to FSub 3 as a contribution to capital.
LLC 2 Country E Branch Restructuring
(cxviii) On Date G, LLC 2 will sell the Target Assets of its Country E Branch (the
"LLC 2 Country E Branch") to FSub 2 in exchange for a note equal to the
fair market value of the Target Assets of the LLC 2 Country E Branch
("Note 14").
(cxix) LLC 2 will distribute Note 14 to Sub 3.
(cxx) Sub 3 will contribute Note 14 to Sub 4 as a contribution to capital.
(cxxi) Sub 4 will contribute Note 14 to Sub 5 as a contribution to capital.
(cxxii) Sub 5 will contribute Note 14 to Sub 6 as a contribution to capital.
(cxxiii) Sub 6 will contribute Note 14 to FSub 1 as a contribution to capital.
(cxxiv) FSub 1 will contribute Note 14 to DRE 4.
(cxxv) DRE 4 will contribute Note 14 to DRE 5.
(cxxvi) DRE 5 will contribute Note 14 to FSub 2 as a contribution to capital.
REPRESENTATIONS
The taxpayer makes the following representations with respect to the Proposed
Transactions:
Sub 2 Restructuring
DRE 1 Restructuring
a) Notes 1, 2, and 3 do not constitute stock or securities for U.S. federal
income tax purposes.
PLR-100120-21 14
b) The value of Note 1 (and the combined values of Notes 2 and 3) that will
be issued by and ultimately transferred to DRE 10 will be equal to the fair
market value of the Target Assets of DRE 1 transferred to DRE 10.
c) Steps (i) through (xii) will occur pursuant to a binding commitment to
undertake such steps.
d) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Notes 2 and 3 will be equal to the fair market value of the Target Assets of
DRE 1 transferred to DRE 10.
e) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Notes 2 and 3 will be equal to the fair market value of the Target Assets of
DRE 1 transferred to DRE 10.
f) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Notes 2 and 3 will be equal to the fair market value of the Target Assets of
DRE 1 transferred to DRE 10.
g) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Notes 2 and 3 will be equal to the fair market value of the Target Assets of
DRE 1 transferred to DRE 10.
h) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Notes 2 and 3 will be equal to the fair market value of the Target Assets of
DRE 1 transferred to DRE 10.
i) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 3 Restructuring
DRE 2 Restructuring
j) Note 4 does not constitute stock or securities for U.S. federal income tax
purposes.
k) The value of Note 4 that will be issued by and ultimately transferred to
DRE 5 will be equal to the fair market value of the DRE 2 Interest
transferred to DRE 5.
l) Steps (xiii) through (xix) will occur pursuant to a binding commitment to
undertake such steps.
PLR-100120-21 15
m) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 4 will be equal to the fair market value of the DRE 2 Interest
transferred to DRE 5.
n) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 4 will be equal to the fair market value of the DRE 2 Interest
transferred to DRE 5.
o) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 4 will be equal to the fair market value of the DRE 2 Interest
transferred to DRE 5.
p) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 4 will be equal to the fair market value of the DRE 2 Interest
transferred to DRE 5.
q) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
DRE 3 Restructuring
r) Note 5 does not constitute stock or securities for U.S. federal income tax
purposes.
s) The value of Note 5 that will be issued by and ultimately transferred to
DRE 7 will be equal to the fair market value of the DRE 3 Interest
transferred to DRE 7.
t) Steps (xx) through (xxvii) will occur pursuant to a binding commitment to
undertake such steps.
u) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 5 will be equal to the fair market value of the DRE 3 Interest
transferred to DRE 7.
v) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 5 will be equal to the fair market value of the DRE 3 Interest
transferred to DRE 7.
w) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 5 will be equal to the fair market value of the DRE 3 Interest
transferred to DRE 7.
x) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 5 will be equal to the fair market value of the DRE 3 Interest
transferred to DRE 7.
PLR-100120-21 16
y) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Restructuring
Sub 1 Country C Branch Restructuring
z) Note 6 does not constitute stock or securities for U.S. federal income tax
purposes.
aa) The value of Note 6 that will be issued by and ultimately transferred to
DRE 13 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
bb) Steps (xxviii) through (xxxviii) will occur pursuant to a binding commitment
to undertake such steps.
cc) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
dd) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
ee) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
ff) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
gg) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
hh) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country C Branch transferred to DRE 13.
ii) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Country G Branch Restructuring
PLR-100120-21 17
jj) Note 7 does not constitute stock or securities for U.S. federal income tax
purposes.
kk) The value of Note 7 that will be issued by and ultimately transferred to
DRE 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
ll) Steps (xxxix) through (xlix) will occur pursuant to a binding commitment to
undertake such steps.
mm) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 7 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
nn) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 7 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
oo) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 7 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
pp) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 7 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
qq) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 7 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
rr) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 7 will be equal to the fair market value of the Target Assets of the
Sub 1 Country G Branch transferred to DRE 11.
ss) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Country K Branch Restructuring
tt) Note 8 does not constitute stock or securities for U.S. federal income tax
purposes.
uu) The value of Note 8 that will be issued by and ultimately transferred to
DRE 14 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
PLR-100120-21 18
vv) Steps (l) through (lxi) will occur pursuant to a binding commitment to
undertake such steps.
ww) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 8 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
xx) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 8 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
yy) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 8 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
zz) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 8 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
aaa) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 8 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
bbb) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 8 will be equal to the fair market value of the Target Assets of the
Sub 1 Country K Branch transferred to DRE 14.
ccc) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Country L Branch Restructuring
ddd) Note 9 does not constitute stock or securities for U.S. federal income tax
purposes.
eee) The value of Note 9 that will be issued by and ultimately transferred to
DRE 15 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
fff) Steps (lxii) through (lxxiii) will occur pursuant to a binding commitment to
undertake such steps.
ggg) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
PLR-100120-21 19
hhh) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
iii) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
jjj) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
kkk) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
lll) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country L Branch transferred to DRE 15.
mmm) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Country H Branch Restructuring
nnn) Note 10 does not constitute stock or securities for U.S. federal income tax
purposes.
ooo) The value of Note 10 that will be issued by and ultimately transferred to
DRE 9 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
ppp) Steps (lxxiv) through (lxxxv) will occur pursuant to a binding commitment
to undertake such steps.
qqq) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 10 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
rrr) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 10 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
sss) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 10 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
PLR-100120-21 20
ttt) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 10 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
uuu) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 10 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
vvv) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 10 will be equal to the fair market value of the Target Assets of the
Sub 1 Country H Branch transferred to DRE 9.
www) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Country F Branch Restructuring
xxx) Note 11 does not constitute stock or securities for U.S. federal income tax
purposes.
yyy) The value of Note 11 that will be issued by and ultimately transferred to
DRE 6 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
zzz) Steps (lxxxvi) through (xcv) will occur pursuant to a binding commitment to
undertake such steps.
aaaa) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
bbbb) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
cccc) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
dddd) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
eeee) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
PLR-100120-21 21
ffff) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 11 will be equal to the fair market value of the Target Assets of the
Sub 1 Country F Branch transferred to DRE 6.
gggg) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
Sub 1 Country J Branch Restructuring
hhhh) Note 12 does not constitute stock or securities for U.S. federal income tax
purposes.
iiii) The value of Note 12 that will be issued by and ultimately transferred to
DRE 12 will be equal to the fair market value of the Target Assets of the
Sub 1 Country J Branch transferred to DRE 12.
jjjj) Steps (xcvi) through (cvi) will occur pursuant to a binding commitment to
undertake such steps.
kkkk) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 12 will be equal to the fair market value of the Target Assets of the
Sub 1 Country J Branch transferred to DRE 12.
llll) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 12 will be equal to the fair market value of the Target Assets of the
Sub 1 Country J Branch transferred to DRE 12.
mmmm) The additional paid in capital in Sub 4 received by Sub 3 in
exchange for Note 12 will be equal to the fair market value of the Target
Assets of the Sub 1 Country J Branch transferred to DRE 12.
nnnn) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 12 will be equal to the fair market value of the Target Assets of the
Sub 1 Country J Branch transferred to DRE 12.
oooo) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 12 will be equal to the fair market value of the Target Assets of the
Sub 1 Country J Branch transferred to DRE 12.
pppp) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 12 will be equal to the fair market value of the Target Assets of the
Sub 1 Country J Branch transferred to DRE 12.
qqqq) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
PLR-100120-21 22
Sub 1 Country I Branch Restructuring
rrrr) Note 13 does not constitute stock or securities for U.S. federal income tax
purposes.
ssss) The value of Note 13 that will be issued by and ultimately transferred to
FSub 3 will be equal to the fair market value of the Target Assets of the
Sub 1 Country I Branch transferred to FSub 3.
tttt) Steps (cvii) through (cxvii) will occur pursuant to a binding commitment to
undertake such steps.
uuuu) The additional paid in capital in Sub 2 received by Sub 1 in exchange for
Note 13 will be equal to the fair market value of the Target Assets of the
Sub 1 Country I Branch transferred to FSub 3.
vvvv) The additional paid in capital in Sub 3 received by Sub 2 in exchange for
Note 13 will be equal to the fair market value of the Target Assets of the
Sub 1 Country I Branch transferred to FSub 3.
wwww) The additional paid in capital in Sub 4 received by Sub 3 in
exchange for Note 13 will be equal to the fair market value of the Target
Assets of the Sub 1 Country I Branch transferred to FSub 3.
xxxx) The additional paid in capital in Sub 5 received by Sub 4 in exchange for
Note 13 will be equal to the fair market value of the Target Assets of the
Sub 1 Country I Branch transferred to FSub 3.
yyyy) The additional paid in capital in Sub 6 received by Sub 5 in exchange for
Note 13 will be equal to the fair market value of the Target Assets of the
Sub 1 Country I Branch transferred to FSub 3.
zzzz) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 13 will be equal to the fair market value of the Target Assets of the
Sub 1 Country I Branch transferred to FSub 3.
aaaaa) The additional paid in capital in FSub 3 received by DRE 7 in
exchange for Note 13 will be equal to the fair market value of the Target
Assets of the Sub 1 Country I Branch transferred to FSub 3.
bbbbb) Each transaction step will be documented and implemented in a
manner that complies with all applicable U.S. federal and state law and
foreign law requirements.
PLR-100120-21 23
LLC 2 Country E Branch Restructuring
ccccc) Note 14 does not constitute stock or securities for U.S. federal income tax
purposes.
ddddd) The value of Note 14 that will be issued by and ultimately
transferred to FSub 2 will be equal to the fair market value of the Target
Assets of the LLC 2 Country E Branch transferred to FSub 2.
eeeee) Steps (cxviii) through (cxxvi) will occur pursuant to a binding
commitment to undertake such steps.
fffff) The additional paid in capital in Sub 4 received by Sub 3 in exchange for
Note 14 will be equal to the fair market value of the Target Assets of the
LLC 2 Country E Branch transferred to FSub 2.
ggggg) The additional paid in capital in Sub 5 received by Sub 4 in
exchange for Note 14 will be equal to the fair market value of the Target
Assets of the LLC 2 Country E Branch transferred to FSub 2.
hhhhh) The additional paid in capital in Sub 6 received by Sub 5 in
exchange for Note 14 will be equal to the fair market value of the Target
Assets of the LLC 2 Country E Branch transferred to FSub 2.
iiiii) The additional paid in capital in FSub 1 received by Sub 6 in exchange for
Note 14 will be equal to the fair market value of the Target Assets of the
LLC 2 Country E Branch transferred to FSub 2.
jjjjj) The additional paid in capital in FSub 2 received by DRE 5 in exchange for
Note 14 will be equal to the fair market value of the Target Assets of the
LLC 2 Country E Branch transferred to FSub 2.
kkkkk) Each transaction step will be documented and implemented in a manner
that complies with all applicable U.S. federal and state law and foreign law
requirements.
RULINGS
Based solely on the information provided and the representations set forth above, the
transactions described in Steps (i) through (xii); (xiii) through (xix); (xx) through (xxvii);
(xxviii) through (xxxviii); (xxxix) through (xlix); (l) through (lxi); (lxii) through (lxxiii); (lxxiv)
through (lxxxv); (lxxxvi) through (xcv); (xcvi) through (cvi); (cvii) through (cxvii); and
(cxviii) through (cxxvi) are circular and therefore disregarded for U.S. federal income tax
purposes. See Rev. Rul. 77-191, 1977-1 C.B. 94; Rev. Rul. 57-311, 1957-2 C.B. 243;
and Rev. Rul. 83-142, 1983-2 C.B. 68. Accordingly:
PLR-100120-21 24
Sub 2 Restructuring
DRE 1 Restructuring
The transfer of the Target Assets of DRE 1 pursuant to steps (i) through (xii) will be
treated as if:
(1) Sub 2 contributed the Target Assets of DRE 1 to Sub 3;
(2) Sub 3 contributed the Target Assets of DRE 1 to Sub 4;
(3) Sub 4 contributed the Target Assets of DRE 1 to Sub 5;
(4) Sub 5 contributed the Target Assets of DRE 1 to Sub 6;
(5) Sub 6 contributed the Target Assets of DRE 1 to FSub 1.
Sub 3 Restructuring
DRE 2 Restructuring
The transfer of the Target Assets of DRE 2 pursuant to steps (xiii) through (xix) will be
treated as if:
(6) Sub 3 contributed the DRE 2 Interest to Sub 4;
(7) Sub 4 contributed the DRE 2 Interest to Sub 5;
(8) Sub 5 contributed the DRE 2 Interest to Sub 6;
(9) Sub 6 contributed the DRE 2 Interest to FSub 1.
DRE 3 Restructuring
The transfer of the Target Assets of DRE 3 pursuant to steps (xx) through (xxvii) will be
treated as if:
(10) Sub 3 contributed the DRE 3 Interest to Sub 4;
(11) Sub 4 contributed the DRE 3 Interest to Sub 5;
(12) Sub 5 contributed the DRE 3 Interest to Sub 6;
(13) Sub 6 contributed the DRE 3 Interest to FSub 1.
Sub 1 Restructuring
PLR-100120-21 25
Sub 1 Country C Branch Restructuring
The transfer of the Target Assets of Sub 1 Country C Branch pursuant to steps (xxviii)
through (xxxviii) will be treated as if:
(14) Sub 1 contributed the Target Assets of Sub 1 Country C Branch to Sub 2;
(15) Sub 2 contributed the Target Assets of Sub 1 Country C Branch to Sub 3;
(16) Sub 3 contributed the Target Assets of Sub 1 Country C Branch to Sub 4;
(17) Sub 4 contributed the Target Assets of Sub 1 Country C Branch to Sub 5;
(18) Sub 5 contributed the Target Assets of Sub 1 Country C Branch to Sub 6;
(19) Sub 6 contributed the Target Assets of Sub 1 Country C Branch to FSub
1.
Sub 1 Country G Branch Restructuring
The transfer of the Target Assets of Sub 1 Country G Branch pursuant to steps (xxxix)
through (xlix) will be treated as if:
(20) Sub 1 contributed the Target Assets of Sub 1 Country G Branch to Sub 2;
(21) Sub 2 contributed the Target Assets of Sub 1 Country G Branch to Sub 3;
(22) Sub 3 contributed the Target Assets of Sub 1 Country G Branch to Sub 4;
(23) Sub 4 contributed the Target Assets of Sub 1 Country G Branch to Sub 5;
(24) Sub 5 contributed the Target Assets of Sub 1 Country G Branch to Sub 6;
(25) Sub 6 contributed the Target Assets of Sub 1 Country G Branch to FSub
1.
Sub 1 Country K Branch Restructuring
The transfer of the Target Assets of Sub 1 Country K Branch pursuant to steps (l)
through (lxi) will be treated as if:
(26) Sub 1 contributed the Target Assets of Sub 1 Country K Branch to Sub 2;
(27) Sub 2 contributed the Target Assets of Sub 1 Country K Branch to Sub 3;
(28) Sub 3 contributed the Target Assets of Sub 1 Country K Branch to Sub 4;
PLR-100120-21 26
(29) Sub 4 contributed the Target Assets of Sub 1 Country K Branch to Sub 5;
(30) Sub 5 contributed the Target Assets of Sub 1 Country K Branch to Sub 6;
(31) Sub 6 contributed the Target Assets of Sub 1 Country K Branch to FSub
1.
Sub 1 Country L Branch Restructuring
The transfer of the Target Assets of Sub 1 Country L Branch pursuant to steps (lxii)
through (lxxiii) will be treated as if:
(32) Sub 1 contributed the Target Assets of Sub 1 Country L Branch to Sub 2;
(33) Sub 2 contributed the Target Assets of Sub 1 Country L Branch to Sub 3;
(34) Sub 3 contributed the Target Assets of Sub 1 Country L Branch to Sub 4;
(35) Sub 4 contributed the Target Assets of Sub 1 Country L Branch to Sub 5;
(36) Sub 5 contributed the Target Assets of Sub 1 Country L Branch to Sub 6;
(37) Sub 6 contributed the Target Assets of Sub 1 Country L Branch to FSub 1.
Sub 1 Country H Branch Restructuring
The transfer of the Target Assets of Sub 1 Country H Branch pursuant to steps (lxxiv)
through (lxxxv) will be treated as if:
(38) Sub 1 contributed the Target Assets of Sub 1 Country H Branch to Sub 2;
(39) Sub 2 contributed the Target Assets of Sub 1 Country H Branch to Sub 3;
(40) Sub 3 contributed the Target Assets of Sub 1 Country H Branch to Sub 4;
(41) Sub 4 contributed the Target Assets of Sub 1 Country H Branch to Sub 5;
(42) Sub 5 contributed the Target Assets of Sub 1 Country H Branch to Sub 6;
(43) Sub 6 contributed the Target Assets of Sub 1 Country H Branch to FSub
1.
Sub 1 Country F Branch Restructuring
PLR-100120-21 27
The transfer of the Target Assets of Sub 1 Country F Branch pursuant to steps (lxxxvi)
through (xcv) will be treated as if:
(44) Sub 1 contributed the Target Assets of Sub 1 Country F Branch to Sub 2;
(45) Sub 2 contributed the Target Assets of Sub 1 Country F Branch to Sub 3;
(46) Sub 3 contributed the Target Assets of Sub 1 Country F Branch to Sub 4;
(47) Sub 4 contributed the Target Assets of Sub 1 Country F Branch to Sub 5;
(48) Sub 5 contributed the Target Assets of Sub 1 Country F Branch to Sub 6;
(49) Sub 6 contributed the Target Assets of Sub 1 Country F Branch to FSub 1.
Sub 1 Country J Branch Restructuring
The transfer of the Target Assets of Sub 1 Country J Branch pursuant to steps (xcvi)
through (cvi) will be treated as if:
(50) Sub 1 contributed the Target Assets of Sub 1 Country J Branch to Sub 2;
(51) Sub 2 contributed the Target Assets of Sub 1 Country J Branch to Sub 3;
(52) Sub 3 contributed the Target Assets of Sub 1 Country J Branch to Sub 4;
(53) Sub 4 contributed the Target Assets of Sub 1 Country J Branch to Sub 5;
(54) Sub 5 contributed the Target Assets of Sub 1 Country J Branch to Sub 6;
(55) Sub 6 contributed the Target Assets of Sub 1 Country J Branch to FSub 1.
Sub 1 Country I Branch Restructuring
The transfer of the Target Assets of Sub 1 Country I Branch pursuant to steps (cvii)
through (cxvii) will be treated as if:
(56) Sub 1 contributed the Target Assets of Sub 1 Country I Branch to Sub 2;
(57) Sub 2 contributed the Target Assets of Sub 1 Country I Branch to Sub 3;
(58) Sub 3 contributed the Target Assets of Sub 1 Country I Branch to Sub 4;
(59) Sub 4 contributed the Target Assets of Sub 1 Country I Branch to Sub 5;
(60) Sub 5 contributed the Target Assets of Sub 1 Country I Branch to Sub 6;
PLR-100120-21 28
(61) Sub 6 contributed the Target Assets of Sub 1 Country I Branch to FSub 1.
(62) FSub 1 contributed the Target Assets of Sub 1 Country I Branch to FSub3.
LLC 2 Country E Branch Restructuring
The transfer of the Target Assets of the LLC 2 Country E Branch pursuant to steps
(cxviii) through (cxxvi) will be treated as if:
(63) Sub 3 contributed the Target Assets of LLC 2 Country E Branch to Sub 4;
(64) Sub 4 contributed the Target Assets of LLC 2 Country E Branch to Sub 5;
(65) Sub 5 contributed the Target Assets of LLC 2 Country E Branch to Sub 6;
(66) Sub 6 contributed the Target Assets of LLC 2 Country E Branch to FSub
1;
(67) FSub 1 contributed the Target Assets of LLC 2 Country E Branch to FSub
2.
In each transfer described in Rulings (1) through (67), each transferee will be treated as
receiving the property it actually received.
CAVEATS
Except as expressly provided herein, no opinion is expressed or implied concerning the
Federal tax consequences of any aspect of any transaction or item discussed or
referenced in this letter. In particular, no opinion is expressed on whether transfers of
the Target Assets or any other Proposed Transactions meet the requirements of section
482, or the regulations promulgated thereunder.
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 this
letter ruling.
PLR-100120-21 29
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,
____________________________________
Aglaia Ovtchinnikova
Acting Assistant to the Branch Chief, Branch 5
Office of Associate Chief Counsel (Corporate)
cc:
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