IRS rules on a multi-step tax-free separation of a public subsidiary through internal and external distributions

Plain-English summary

A publicly traded parent company owned a majority stake in a separately public subsidiary ("Controlled") through a chain of holding companies, and it wanted to fully separate that subsidiary and hand its shares out to the parent's own shareholders. The separation was structured as a series of steps: the subsidiary borrowed money and paid a cash distribution up the chain, the Controlled shares were passed up through three internal distributions between the holding companies, and then the top parent distributed the Controlled shares to its shareholders (the "external distribution"), with the subsidiary's dual-class stock collapsing into a single class afterward. The company asked the IRS to confirm the tax consequences under Internal Revenue Code § 355 (tax-free spin-offs) and § 301 (corporate distributions). The IRS ruled that no gain or loss is recognized on the internal distributions or the external distribution, that basis and holding periods carry over and are allocated between the parent and Controlled shares, that earnings and profits are split between the corporations, and that the cash paid to the parent's chain is treated as a § 301 distribution. Cash paid to shareholders in lieu of fractional shares is treated as a sale. As with all these rulings, the IRS expressly did not decide the "business purpose," "device," or "change of control" questions that the taxpayer must satisfy on its own. This is a complex transactional ruling of the kind large corporate groups obtain before executing a public-company separation.

Ruling snapshot

• Question: Do the internal distributions, the external distribution, and the related cash distribution in this multi-step separation of a controlled subsidiary qualify for tax-free treatment under § 355, with the cash distribution treated under § 301?
• Outcome: approved (no gain or loss on the distributions; basis, holding period, and earnings-and-profits rulings granted; cash distribution treated as a § 301 distribution)
• Key authorities: IRC §§ 355, 301, 358, 312, 1223, 1001, 1502; Treas. Reg. §§ 1.355-2, 1.355-7, 1.355-8, 1.358-2, 1.312-10, 1.1502-13; Arrowsmith v. Commissioner, 344 U.S. 6 (1952); Rev. Rul. 83-73; Rev. Rul. 73-54; Rev. Proc. 2017-52

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202150012 Third Party Communication: None
Release Date: 12/17/2021 Date of Communication: Not Applicable
Index Number: 301.00-00, 355.00-00
Person To Contact:
---------------------- ---------------------------, ID No. ---------------
--------------------------------------- Telephone Number:
------------------------------ --------------------
------------------ Refer Reply To:
----------------------------------- CC:CORP:1
PLR-108133-21
Date:
September 21, 2021

Legend

Distributing = ------------------------------
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Distributing 1 = -----------------------
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Distributing 2 = -----------
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Distributing 3 = --------------------------------
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Controlled = ------------------
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Distributing Class A = ------------------------------------------------------------
----

Distributing Class B = -------------------------------------------------------

Distributing Class C = -------------------------------------------------------

Controlled Class A = ------------------------------------------

Controlled Class B = ------------------------------------------

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

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

Business C = -----------------------------

Domestic Segment = -------------------------------------------

Foreign Segment = ----------------------------------------

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

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

a = ---------------

b = ------

c = ------

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

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

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

g = -------------

h = --

i = --

j = ---

k = --

l = ---

m = --

Commercial Agreement = ----------------------------------------------------

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

  This letter responds to your letter dated April 12, 2021, as supplemented by

subsequent submissions, requesting rulings on certain U.S. federal income tax
consequences of a series of proposed transactions (collectively, the "Proposed
Transaction").

   This letter is issued pursuant to Rev. Proc. 2017-52, 2017-41 I.R.B. 283,

regarding one or more "Covered Transactions" under section 355 of the Internal
Revenue Code (the "Code") and pursuant to section 6.03(2) of Rev. Proc. 2021-1,
2021-1 I.R.B. 1, regarding one or more significant issues under section 355 of the Code.
This office expresses no opinion as to any issue not specifically addressed by the
rulings below.

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

submitted by the taxpayer and accompanied by a penalties of perjury statement
executed by an appropriate party. This office has not verified any of the materials
submitted in support of the request for rulings. Verification of the information,
representations, and other data may be required as part of the audit process.

    This office has made no determination regarding whether any of the Distributions

(as defined below): (i) satisfies the business purpose requirement of Treas. Reg. §
1.355-2(b); (ii) is used principally as a device for the distribution of the earnings and
profits of the distributing corporation or the controlled corporation or both (see section
355(a)(1)(B) and Treas. Reg. § 1.355-2(d)); or (iii) is part of a plan (or series of related
transactions) pursuant to which one or more persons will acquire directly or indirectly
stock representing a 50-percent or greater interest in the distributing corporation or the
controlled corporation, or any predecessor or successor of the distributing corporation
or the controlled corporation, within the meaning of Treas. Reg. § 1.355-
8 (see section 355(e)(2)(A)(ii) and Treas. Reg. § 1.355-7).

                                 Summary of Facts

     Distributing, a State X publicly traded corporation, is the ultimate parent of a

worldwide group that includes corporations, entities disregarded for U.S. federal income
tax purposes from their sole regarded owner under Treas. Reg. § 301.7701-3 (each, a
"DRE"), and partnerships for U.S. federal income tax purposes (the "Distributing
Group"). Distributing is also the common parent of an affiliated group of corporations
that files a consolidated U.S. federal income tax return (the "Distributing Consolidated
Group"). The Distributing Group's business operations consist of Business A, Business
B, and Business C. Business B consists of Domestic Segment and Foreign Segment.
Distributing has three classes of common stock outstanding: (i) Distributing Class A, (ii)
Distributing Class B, and (iii) Distributing Class C.

    Distributing owns all the stock of Distributing 3, a State X corporation.

  Distributing 3 owns all the stock of Distributing 2, a State X corporation.

   Distributing 2 owns all the stock of Distributing 1, a State Y corporation.

Distributing 2 also owns, directly and indirectly, the stock of a number of domestic and
foreign corporations, interests in a number of partnerships, and DREs (the "Distributing
2 Group").

    Distributing 1 owns, directly and indirectly, including through DREs, all of the

Controlled Class B common stock and approximately a shares of Controlled Class A
common stock (collectively, the "Distributing Group Controlled Shares") of Controlled, a
State X corporation. The Distributing Group Controlled Shares reflect approximately (i)
b percent of the total Controlled common stock outstanding and (ii) c percent of the
voting power of all Controlled common stock outstanding. The Controlled Class A
common stock is publicly traded with approximately d shares held by shareholders other
than Distributing 1 (such shareholders, the "Controlled Public Shareholders"). In
addition, Distributing 1 owns, directly and indirectly, the stock of a number of domestic
and foreign corporations, interests in a number of partnerships, and DREs (the
"Distributing 1 Group").

   Controlled owns, directly and indirectly, the stock of a number of domestic and

foreign corporations, interests in a number of partnerships, and DREs (the "Controlled
Group").

   Distributing 1 is engaged directly in Domestic Segment and the Controlled Group

is engaged in Business C. Financial information has been received indicating that
Domestic Segment and Business C have had gross receipts and operating expenses
representing the active conduct of a trade or business for at least the past five years.

                            Proposed Transaction

   For what are represented to be valid corporate business purposes (the

"Corporate Business Purposes"), the Distributing Group proposes to engage in the
following transactions, some of which have already been consummated, to separate
Controlled from the Distributing Group—i.e., the Proposed Transaction:

1. Controlled will borrow approximately e from third-party lenders (the "Controlled
   Borrowing"), all of which will occur before the Controlled Cash Distribution
   (defined below).

2. Distributing 1 will distribute all the Distributing Group Controlled Shares to
   Distributing 2 ("Internal Distribution 1").

3. Controlled will distribute approximately f to g pro rata to Distributing 2 and the
   Controlled Public Shareholders (the "Controlled Cash Distribution").

4. Distributing 2 will use existing cash on hand and the cash from the Controlled
   Cash Distribution to repay approximately f to g of third-party debt (the
   "Distributing 2 Debt Repayment"). The Distributing 2 Debt Repayment may occur
   after the External Distribution (defined below).

5. Distributing 2 will distribute all the Distributing Group Controlled Shares to
   Distributing 3 ("Internal Distribution 2").

6. Distributing 3 will distribute all the Distributing Group Controlled Shares to
   Distributing ("Internal Distribution 3").

7. Distributing will distribute all the Distributing Group Controlled Shares to its
   shareholders pro rata (the "External Distribution" and, together with Internal
   Distribution 1, Internal Distribution 2, and Internal Distribution 3, the
   "Distributions"). Distributing shareholders that otherwise would be entitled to
   receive fractional shares of Controlled in the External Distribution will receive
   cash in lieu thereof. A distribution agent will aggregate fractional shares into
   whole shares, sell the whole shares in the open market at prevailing market
   prices and distribute the proceeds to Distributing's shareholders otherwise
   entitled to such interest (the "Fractional Share Sales").

8. Immediately after the External Distribution, each share of Controlled Class B
   common stock will automatically convert into one share of Controlled Class A
   common stock (the "Controlled Recapitalization").

Continuing Arrangements

   In connection with the Proposed Transaction, the Distributing Group and

Controlled have entered into and will enter into continuing commercial arrangements,
including a Commercial Agreement, and other customary agreements, including a
separation and distribution agreement, transition services agreement, and tax matters
agreement (the "Continuing Arrangements"). The Commercial Agreement will govern
certain continuing business relationships between the Distributing Group and
Controlled. The Commercial Agreement has an initial h-year term with automatic i-year
extensions, which either party can terminate. All of the Continuing Arrangements will be
based on arm's length terms and conditions, including arm's length pricing, except with
respect to certain payments made pursuant to the transition services agreement that
may be priced at cost or cost-plus for up to j months. All such relationships are not
inconsistent with the overall separation of Controlled from the Distributing Group.

Board Overlap

  Following the Proposed Transaction, Distributing's board of directors will consist

of k members and Controlled's board of directors will consist of l members. It is
expected that m directors of Distributing will also be members of the board of directors
of Controlled (the "Overlapping Directors"). The Overlapping Directors are expected to
give both corporations access to the experience base of such directors.

                                 Representations

  Distributing has made the following representations with respect to the Proposed

Transaction.

Internal Distribution 1

 With respect to Internal Distribution 1, except as set forth below, Distributing has

made all of the representations in section 3 of the Appendix to Rev. Proc. 2017-52.

1. Distributing has made the following alternative representations: Representations
   3(a); 8(b); 11(a); 15(b); 31(a); 41(a).

2. Distributing has not made the following representations, which do not apply to
   Internal Distribution 1: Representations 7; 17; 18; 19; 20; 22; 24; 25; 26; 35; 39.

3. Distributing has not made the following representation, but provided the required
   explanation: Representation 40.

4. Distributing has made the following modified representations:

   Representation 32: Except for amounts payable under the Continuing
   Arrangements or liabilities arising in the ordinary course of business, no intercorporate
   debt will exist between Distributing 1 and Controlled (and their respective affiliates, as
   applicable) at the time of, or subsequent to, Internal Distribution 1.

   Representation 33: Except with respect to certain payments made pursuant to
   

   the transition services agreement, payments made in connection with all continuing
   transactions, if any, between Distributing 1 and Controlled after Internal Distribution 1
   will be for fair market value based on arm's-length terms.

    Representation 34: Distributing 1 and Controlled each will pay its own expenses,
   

   if any, incurred in connection with Internal Distribution 1 except that Distributing and its
   affiliates may pay certain corporate-level expenses that are solely and directly related
   (within the meaning of Rev. Rul. 73-54, 1973-1 C.B. 187) to Internal Distribution 1 (such
   as legal, accounting, and other advisory fees and administrative expenses incurred in
   connection with Internal Distribution 1).

   Representation 46: Controlled will not issue stock or securities to a person other
   than Distributing 1 in anticipation of Internal Distribution 1, other than potentially
   pursuant to the Controlled Borrowing.

Internal Distribution 2

 With respect to Internal Distribution 2, except as set forth below, Distributing has

made all of the representations in section 3 of the Appendix to Rev. Proc. 2017-52.

5. Distributing has made the following alternative representations: Representations
   3(a); 8(b); 11(a); 15(a); 31(a); 41(a).

6. Distributing has not made the following representations, which do not apply to
   Internal Distribution 2: Representations 7; 17; 18; 19; 20; 22; 24; 25; 26; 35; 39.

7. Distributing has not made the following representation, but provided the required
   explanation: Representation 40.

8. Distributing has made the following modified representations:

   Representation 32: Except for amounts payable under the Continuing
   Arrangements or liabilities arising in the ordinary course of business, no intercorporate
   debt will exist between Distributing 2 and Controlled (and their respective affiliates, as
   applicable) at the time of, or subsequent to, Internal Distribution 2.

   Representation 33: Except with respect to certain payments made pursuant to
   

   the transition services agreement, payments made in connection with all continuing
   transactions, if any, between Distributing 2 and Controlled after Internal Distribution 2
   will be for fair market value based on arm's-length terms.

    Representation 34: Distributing 2 and Controlled each will pay its own expenses,
   

   if any, incurred in connection with Internal Distribution 2 except that Distributing and its
   affiliates may pay certain corporate-level expenses that are solely and directly related
   (within the meaning of Rev. Rul. 73-54, 1973-1 C.B. 187) to Internal Distribution 2 (such
   as legal, accounting, and other advisory fees and administrative expenses incurred in
   connection with Internal Distribution 2).

   Representation 46: Controlled will not issue stock or securities to a person other
   than Distributing 2 in anticipation of Internal Distribution 2, other than potentially
   pursuant to the Controlled Borrowing.

Internal Distribution 3

 With respect to Internal Distribution 3, except as set forth below, Distributing has

made all of the representations in section 3 of the Appendix to Rev. Proc. 2017-52.

9. Distributing has made the following alternative representations: Representations
   3(a); 8(b); 11(a); 15(a); 31(a); 41(a).

10. Distributing has not made the following representations, which do not apply to
    Internal Distribution 3: Representations 7; 17; 18; 19; 20; 22; 24; 25; 26; 35; 39.

11. Distributing has not made the following representation, but provided the required
    explanation: Representation 40.

12. Distributing has made the following modified representations:

    Representation 32: Except for amounts payable under the Continuing
    Arrangements or liabilities arising in the ordinary course of business, no intercorporate
    debt will exist between Distributing 3 and Controlled (and their respective affiliates, as
    applicable) at the time of, or subsequent to, Internal Distribution 3.

    Representation 33: Except with respect to certain payments made pursuant to
    

    the transition services agreement, payments made in connection with all continuing
    transactions, if any, between Distributing 3 and Controlled after Internal Distribution 3
    will be for fair market value based on arm's-length terms.

     Representation 34: Distributing 3 and Controlled each will pay its own expenses,
    

    if any, incurred in connection with Internal Distribution 3 except that Distributing and its
    affiliates may pay certain corporate-level expenses that are solely and directly related
    (within the meaning of Rev. Rul. 73-54, 1973-1 C.B. 187) to Internal Distribution 3 (such
    as legal, accounting, and other advisory fees and administrative expenses incurred in
    connection with Internal Distribution 3).

External Distribution

 With respect to the External Distribution, except as set forth below, Distributing

has made all of the representations in section 3 of the Appendix to Rev. Proc. 2017-52.

13. Distributing has made the following alternative representations: Representations
    3(a); 8(b); 11(a); 15(a); 31(a); 41(a).

14. Distributing has not made the following representations, which do not apply to the
    External Distribution: Representations 7; 17; 18; 19; 20; 22; 24; 25; 26; 35; 39;
    40.

15. Distributing has made the following modified representations:

    Representation 32: Except for amounts payable under the Continuing
    Arrangements or liabilities arising in the ordinary course of business, no intercorporate
    debt will exist between Distributing and Controlled (and their respective affiliates, as
    applicable) at the time of, or subsequent to, the External Distribution

    Representation 33: Except with respect to certain payments made pursuant to
    

    the transition services agreement, payments made in connection with all continuing
    transactions, if any, between Distributing and Controlled after the External Distribution
    will be for fair market value based on arm's-length terms.

     Representation 34: Distributing and Controlled each will pay its own expenses, if
    

    any, incurred in connection with the External Distribution except that Distributing and its
    affiliates may pay certain corporate-level expenses that are solely and directly related
    (within the meaning of Rev. Rul. 73-54, 1973-1 C.B. 187) to the External Distribution
    (such as legal, accounting, and other advisory fees and administrative expenses
    incurred in connection with the External Distribution).

    Representation 35: The payment of cash in lieu of fractional shares of Controlled
    

    is solely for the purpose of avoiding the expense and inconvenience of issuing fractional
    shares and does not represent separately bargained-for consideration. The fractional
    share interests of each Distributing shareholder will be aggregated and no Distributing
    shareholder of record will receive cash in an amount equal to or greater than the value
    of one full share of Controlled (with the possible exception of shareholders who hold
    Distributing stock in multiple accounts or with multiple brokers).

Additional Representations

   With respect to the Proposed Transaction, Distributing has made the following

additional representations:

16. At no point during the Proposed Transaction will a member of the Distributing
    Group that is distributing the stock of Controlled pursuant to the Proposed
    Transaction have an excess loss account (within the meaning of Treas. Reg. §
    1.1502-19) in the stock of Controlled.

17. Distributing 2 will use the proceeds from the Controlled Cash Distribution to
    repay indebtedness issued to third parties.

18. Distributing 2 will not be obligated to contribute the proceeds of the Controlled
    Cash Distribution to Distributing 1 and will have no plan or intention to contribute
    the proceeds of the Controlled Cash Distribution to Distributing 1.

19. Controlled will be the sole obligor on the Controlled Borrowing, and after the
    External Distribution, neither Distributing 1 nor any member of the Distributing
    Group will be a guarantor on the Controlled Borrowing.

                                     Rulings
    
    Based solely on the information submitted and the representations made, we rule
    

    as follows with respect to the Proposed Transaction:

Internal Distribution 1

1. No gain or loss will be recognized by (and no amount will be included in the
   income of) Distributing 2 upon receipt of the Controlled stock in Internal
   Distribution 1 (section 355(a)).

2. No gain or loss will be recognized by Distributing 1 on the distribution of
   Controlled's stock in Internal Distribution 1 (section 355(c)(1)).

3. The aggregate basis of the Distributing 1 stock and the Controlled stock in the
   hands of Distributing 2 immediately after Internal Distribution 1 will be the same
   as Distributing 2's basis in the Distributing 1 stock immediately before Internal
   Distribution 1, allocated between the Distributing 1 stock and the Controlled stock
   in proportion to the fair market value of each immediately following Internal
   Distribution 1 (section 358(b)(2) and (c); Treas. Reg. § 1.358-2(a)(2)(iv) and (v)).

4. The holding period of the Controlled stock received by Distributing 2 in Internal
   Distribution 1 will include the holding period of the Distributing 1 stock held by
   Distributing 2 with respect to which Internal Distribution 1 will be made, provided
   that such Distributing 1 stock is held as a capital asset on the date of Internal
   Distribution 1 (section 1223(1)).

5. Earnings and profits, if any, will be allocated between Distributing 1 and
   Controlled in accordance with section 312(h), Treas. Reg. § 1.312-10(b), and
   Treas. Reg. § 1.1502-33(f)(2).

Internal Distribution 2

6. No gain or loss will be recognized by (and no amount will be included in the
   income of) Distributing 3 upon receipt of the Controlled stock in Internal
   Distribution 2 (section 355(a)).

7. No gain or loss will be recognized by Distributing 2 on the distribution of
   Controlled's stock in Internal Distribution 2 (section 355(c)(1)).

8. The aggregate basis of the Distributing 2 stock and the Controlled stock in the
   hands of Distributing 3 immediately after Internal Distribution 2 will be the same
   as Distributing 3's basis in the Distributing 2 stock immediately before Internal
   Distribution 2, allocated between the Distributing 2 stock and the Controlled stock
   in proportion to the fair market value of each immediately following Internal
   Distribution 2 (section 358(b)(2) and (c); Treas. Reg. § 1.358-2(a)(2)(iv) and (v)).

9. The holding period of the Controlled stock received by Distributing 3 in Internal
   Distribution 2 will include the holding period of the Distributing 2 stock held by
   Distributing 3 with respect to which Internal Distribution 2 will be made, provided
   that such Distributing 2 stock is held as a capital asset on the date of Internal
   Distribution 2 (section 1223(1)).

10. Earnings and profits, if any, will be allocated between Distributing 2 and
    Controlled in accordance with section 312(h), Treas. Reg. § 1.312-10(b), and
    Treas. Reg. § 1.1502-33(f)(2).

Internal Distribution 3

11. No gain or loss will be recognized by (and no amount will be included in the
    income of) Distributing upon receipt of the Controlled stock in Internal Distribution
    3 (section 355(a)).

12. No gain or loss will be recognized by Distributing 3 on the distribution of
    Controlled's stock in Internal Distribution 3 (section 355(c)(1)).

13. The aggregate basis of the Distributing 3 stock and the Controlled stock in the
    hands of Distributing immediately after Internal Distribution 3 will be the same as
    Distributing's basis in the Distributing 3 stock immediately before Internal
    Distribution 3, allocated between the Distributing 3 stock and the Controlled stock
    in proportion to the fair market value of each immediately following Internal
    Distribution 3 (section 358(b)(2) and (c); Treas. Reg. § 1.358-2(a)(2)(iv) and (v)).

14. The holding period of the Controlled stock received by Distributing in Internal
    Distribution 3 will include the holding period of the Distributing 3 stock held by
    Distributing with respect to which Internal Distribution 3 will be made, provided
    that such Distributing 3 stock is held as a capital asset on the date of Internal
    Distribution 3 (section 1223(1)).

15. Earnings and profits, if any, will be allocated between Distributing 3 and
    Controlled in accordance with section 312(h), Treas. Reg. § 1.312-10(b), and
    Treas. Reg. § 1.1502-33(f)(2).

External Distribution

16. No gain or loss will be recognized by (and no amount will be included in the
    income of) Distributing shareholders upon receipt of the Controlled stock in the
    External Distribution (section 355(a)).

17. No gain or loss will be recognized by Distributing on the distribution of
    Controlled's stock in the External Distribution (section 355(c)(1)).

18. The aggregate basis of the Distributing stock and the Controlled stock in the
    hands of Distributing shareholders after the External Distribution will be the same
    as such shareholders' basis in the Distributing stock immediately before the
    External Distribution, allocated between the Distributing stock and the Controlled
    stock in proportion to the fair market value of each immediately following the
    External Distribution (section 358(b)(2) and (c); Treas. Reg. § 1.358-2(a)(2)(iv)
    and (v)).

19. The holding period of the Controlled stock received by Distributing shareholders
    in the external Distribution will include the holding period of the Distributing stock
    held by such Distributing shareholder with respect to which the External
    Distribution will be made, provided that such Distributing stock is held as a capital
    asset on the date of the External Distribution (section 1223(1)).

20. Earnings and profits, if any, will be allocated between Distributing and Controlled
    in accordance with section 312(h), Treas. Reg. § 1.312-10(b), and Treas. Reg.
    § 1.1502-33(e)(3).

21. The receipt by Distributing shareholders of cash in lieu of fractional shares of
    Controlled stock will be treated for U.S. federal income tax purposes as if the
    fractional shares had been distributed to the Distributing shareholders as part of
    the External Distribution and then had been disposed of by such shareholders for
    the amount of such cash in a sale or exchange. The gain (or loss) recognized
    (determined using the basis allocated to the fractional shares in Ruling 18), if
    any, will be treated as capital gain (or loss), provided the stock was held as a
    capital asset by the selling shareholder (Section 1001). Such gain (or loss) will
    be short-term or long-term capital gain (or loss) (determined using the holding
    period provided in Ruling 19).

The Tax Matters Agreement

22. Any payments made between Distributing or any of its affiliates and Controlled
    or any of its affiliates under the tax matters agreement that (i) have arisen or will
    arise for a taxable period ending on or before the date of Internal Distribution 1,
    or for a taxable period beginning before but ending after the date of Internal
    Distribution 1, and (ii) will not have become fixed and ascertainable until after
    Internal Distribution 1, will be treated as occurring immediately before the date of
    Internal Distribution 1. See Arrowsmith v. Comm'r, 344 U.S. 6 (1952); Rev. Rul.
    83-73, 1983-1 C.B. 84.

The Controlled Cash Distribution

23. The Controlled Cash Distribution will be treated for U.S. federal income tax
    purposes as occurring after Internal Distribution 1 and before Internal Distribution
    2.

24. For U.S. federal income tax purposes, the Controlled Cash Distribution will be
    treated as a distribution by Controlled to Distributing 2 and the Controlled Public
    Shareholders to which section 301 applies. The portion of the Cash Distribution
    received by Distributing 2 will be treated as an intercompany distribution to which
    Treas. Reg. § 1.1502-13(f)(2) applies.

                                    Caveats
    

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

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.

                             Procedural Statements

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,

                                   Richard M. Heinecke
                                   Richard M. Heinecke
                                   Branch Chief, Branch 5
                                   Office of Associate Chief Counsel (Corporate)

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