A publicly traded parent's multi-step internal restructuring and spin-off-then-merger qualifies as tax-free under sections 355 and 368
Plain-English summary
A publicly traded multinational parent (called "Distributing") wants to
separate one part of its business (the "SpinCo Business," made up of two
lines of business) from the part it will keep (the "RemainCo Business,"
made up of three lines of business), then combine the separated business
with an outside company ("Acquiring") through a merger. To get there, the
group runs a long chain of internal steps: check-the-box elections that are
treated as asset transfers, several contributions of assets to new
"Controlled" subsidiaries, and a series of stock distributions that push the
SpinCo Business up through the corporate chain until its shares reach
Distributing's own public shareholders. The company asked the IRS to confirm
that each contribution-and-distribution pair is a tax-free "D reorganization"
under section 368(a)(1)(D) and that each distribution qualifies for
nonrecognition under section 355. The IRS agreed, issuing 51 favorable
rulings. In plain terms: no corporation or shareholder in the chain
recognizes gain or loss on these internal transfers and spin-off
distributions, asset basis and holding periods carry over, and earnings and
profits are split between the distributing and controlled companies under the
normal rules. The ruling also addresses mechanics of the later public merger,
including how stock buybacks and cash paid for fractional shares are treated
for the section 355(e) anti-abuse test. The IRS expressly gave no opinion on
whether the spin-offs meet the business-purpose requirement, nor on the
merger and several other steps, so those pieces stand outside this ruling.
Ruling snapshot
- Question: Do a public parent's multi-step internal reorganization and its spin-off-then-merger of a business qualify for tax-free treatment under sections 355 and 368(a)(1)(D)?
- Outcome: approved (51 rulings, all favorable)
- Key authorities: IRC §§ 355, 361, 368(a)(1)(D), 358, 362, 1032, 357, 1223, 312(h); Treas. Reg. §§ 1.358-1, 1.358-2, 1.312-10, 1.355-7; Arrowsmith v. Commissioner, 344 U.S. 6 (1952); Rev. Rul. 83-73
Full text (IRS public release)
Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 202616004
Release Date: 4/17/2026
Index Number: 355.01-00, 355.01-01, 355.10-00, 361.02-02, 361.02-00
Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
-----------------------, ID No. -----------------
Telephone Number:
Refer Reply To:
CC:CORP:BO2
PLR-116255-25
Date:
January 22, 2026
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Distributing = ---------------------------------------------
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Controlled 1 = ----------------------------------------
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Controlled 2 = ------------------------------------------------------
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Controlled 3 = -----------------------------------------------------------
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Acquiring = ----------------------------
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Acquiring Sub = -----------------------------------------------
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Merger Sub = -------------------------------
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DRE 1 = ------------------------------------------
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DRE 2 = ------------------------
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DRE 3 = --------------------------------------
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DRE 4 = ---------------------------------------------
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DRE 5 = ----------------------------------------
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DRE 6 = ----------------------------------------------------------------------
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DRE 7 = -----------------------------------------
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DRE 8 = --------------------------------------------------------------
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DRE 10 = -----------------------------------------------
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DRE 11 = --------------------------------
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DRE 12 = -----------------------------------------------------------
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Sub 1 = ------------------------------------------------------------------
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Sub 7 = --------------------------------
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Sub 8 = -------------------------------------------------------
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FSub 1 = -------------------------------------------------------
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FSub 2 = -------------------------------------------------------
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Distributing Senior Notes = -----------------------------------------------------------------------
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Borrowings = --------------------------------------------------------------------------------
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Date 1 = ------------------
Date 2 = ------------------
Jurisdiction A = ----------------
SpinCo Business = ---------------------------------------------------------------------------------
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RemainCo Business = --------------------------------------------------------------------------------------
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Business A = --------------------------------------------------------------------------------
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Business B = --------------------------------------------------------------------------------
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Business C = -----------------------------------------------------------------
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Business D = --------------------------------------------------------------------------------
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Business E = --------------------------------------------------------------------------------
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Business F = --------------------------------------------------------------------------------
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l = ----------
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p = --------------
Fund A = ---------------------------------------------------
Relevant Time = ---------------------------------------------------------------------------------
Separation Agreement = ---------------------------------------------------------------------------------
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Tax Matters Agreement = --------------------------------------------------------------------------------
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Transition Services Agreement = -----------------------------------------------------------------------
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Delayed Transfer Agreements = -----------------------------------------------------------------------
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Regulatory Agreement = --------------------------------------------------------------------------------
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IP Matters Agreement = --------------------------------------------------------------------------------
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Lease Agreements = --------------------------------------------------------------------------------
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Contract Manufacturing Agreements = --------------------------------------------------------------
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Reverse Contract Manufacturing Agreements = ----------------------------------------------------
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Fund A Information = --------------------------------------------------------------------------------
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Cash Adjustment = --------------------------------------------------------------------------------
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Dear -----------------:
This letter responds to a letter dated September 10, 2025, submitted on behalf of
Distributing, its affiliates, and its shareholders, requesting rulings (the “Ruling Request”)
on certain federal income tax consequences of a series of proposed transactions (the
“Proposed Transactions,” as defined below). The material information submitted in that
request and subsequent correspondence is summarized below.
This letter is issued pursuant to Rev. Proc. 2017-52, 2017-41 I.R.B. 283, Rev.
Proc. 2023-26, 2023-33 I.R.B. 485, and Rev. Proc. 2024-24, 2024-21 I.R.B. 1214,
regarding one or more transactions under section 355 and/or section 368 of the Internal
Revenue Code (the “Code”). The Office expresses no opinion as to the overall tax
consequences of the transactions described in this letter or 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. While this office has not verified any of the materials
submitted in support of the request for rulings, it is subject to verification on
examination.
This office has made no determination regarding whether each of the
distributions in the Proposed Transactions (defined below) satisfies the business
purpose requirement of Treas. Reg. § 1.355-2(b).
Summary of Facts
Distributing, a publicly traded corporation, is the parent company of a worldwide
group of foreign and domestic affiliates (the “Distributing Group”). Distributing is the
common parent of an affiliated group of corporations that join in the filing of a
consolidated federal income tax return (the “Distributing Consolidated Group”).
Distributing has a single class of common stock issued and outstanding (the
“Distributing Common Stock”), approximately a% (the “Hook Stock”) of which is held by
DRE 1, an indirect, wholly owned subsidiary of Distributing that is classified as an entity
disregarded as separate from its owner for federal tax purposes (a “disregarded entity”).
Approximately o% of the outstanding Distributing Common Stock is held in “rabbi trusts”
providing for deferred compensation for employees and directors (together, the “Rabbi
Trusts”). As grantor of the Rabbi Trusts, Distributing is treated as the owner for federal
income tax purposes of the Distributing Common Stock held by the Rabbi Trusts.
Accordingly, Distributing treats the Distributing Common Stock held by the Rabbi Trusts
as disregarded for federal income tax purposes.
Prior to the Proposed Transactions (defined below), Distributing and its
subsidiaries will be engaged in the RemainCo Business (including Business C,
Business D, and Business E) and the SpinCo Business (including Business A and
Business B).
Distributing owns all the issued and outstanding equity interests in Sub 1.
Sub 1 directly owns all the issued and outstanding stock of Sub 2 and DRE 2, a
disregarded entity.
Sub 2 directly and indirectly (through various subsidiaries classified as
corporations or disregarded entities) owns b% of the issued and outstanding equity
interests in Sub 3. DRE 2 owns all the issued and outstanding equity interests in Sub 4.
Sub 4 owns all the issued and outstanding equity interests in Sub 5 and Sub 6.
Sub 5 directly and indirectly (through disregarded entities) owns all the issued
and outstanding equity interests in DRE 3, DRE 4, and DRE 5, each of which is
classified as a disregarded entity.
Sub 1, DRE 2, and Sub 5 respectively own c%, d%, and e% of the issued and
outstanding common shares of Sub 7.
Sub 1, Sub 2, and Sub 3 respectively own f%, g%, and h% of the issued and
outstanding preferred stock of Sub 7.
Sub 1 directly and indirectly (through members of its separate affiliated group
within the meaning of section 355(b)(3)(B)) owns b% of the total value and voting power
of Sub 7.
Sub 7 owns all the issued and outstanding equity interests in Sub 8.
Sub 8 owns all the issued and outstanding equity interests in FSub 1 and FSub
2.
FSub 1 owns all the issued and outstanding equity interests in DRE 1.
FSub 2 owns all the issued and outstanding equity interests in each of (i) DRE 6,
(ii) DRE 7, and (iii) DRE 8, each of which is classified as a disregarded entity.
DRE 6 owns all the issued and outstanding equity interests in DRE 9, an entity
classified as a disregarded entity.
DRE 7 has a branch in Jurisdiction A.
DRE 8 indirectly (through disregarded entities) owns all the issued and
outstanding equity interests in DRE 10, an entity classified as a disregarded entity. DRE
8 also owns (directly or indirectly through disregarded entities) all the issued and
outstanding equity interests in DRE 11, an entity classified as a disregarded entity. DRE
11 also has a branch in Jurisdiction A.
Each of Sub 1, Sub 2, Sub 3, Sub 4, Sub 5, Sub 6, Sub 7, and Sub 8 is a
member of the Distributing Consolidated Group.
Acquiring is a publicly traded corporation and the parent of a worldwide group
that includes both domestic and foreign entities.
On Date 1, Distributing entered into a definitive agreement (the “Merger
Agreement”) to distribute the SpinCo Business and combine Controlled 1 with
Acquiring.
Certain shareholders own both Distributing Common Stock and Acquiring
common stock (the “Overlapping Shareholders”). Without taking into account the
Overlapping Shareholders, Distributing’s shareholders are expected to own
approximately i% of the combined company, while Acquiring’s shareholders are
expected to hold the remaining j% of the combined company.
As of Date 2, (the “Earliest Applicable Date”) Distributing had amounts
outstanding under the Distributing Senior Notes and approximately $p of commercial
paper (which $k of commercial paper, together with the Distributing Senior Notes,
comprise the “Distributing Debt”). None of the Distributing Senior Notes was issued in
anticipation of the Proposed Transactions. Distributing also expects to incur (or has
incurred) an incremental amount of Distributing commercial paper prior to the Proposed
Transactions (i.e., the “Borrowings”). All Borrowings were, or would be, incurred without
regard to the Proposed Transactions or any transaction related to the Proposed
Transactions, and the Borrowings are unrelated to, and demonstrably independent of,
any such transaction.
For purposes of satisfying the active trade or business requirements of section
355(b) with respect to each of the Distributions (defined below), financial information
has been submitted in accordance with Rev. Proc. 2017-52, 2017-41 I.R.B. 283,
indicating that each of Business A, Business B, Business C, Business D, and Business
E has had gross receipts and operating expenses representing the active conduct of a
trade or business for each of the past five years.
The Jurisdiction A branch of DRE 7 is engaged in Business A. DRE 10 is
engaged in Business B. The Jurisdiction A branch of DRE 11 is engaged in Business C.
Sub 4, Sub 6, DRE 3, and DRE 4 are engaged in Business D. Sub 5, DRE 3, DRE 4,
DRE 5, and DRE 9 are engaged in Business E.
Proposed Transactions
The following transactions (the “Proposed Transactions”) occurred or will occur to
separate the SpinCo Business from the Distributing Group (the “Separation”):
-
Distributing formed Controlled 1.
-
Sub 8 formed a new domestic entity, Controlled 2, which initially is classified as a
corporation, and Sub 8 (or a disregarded entity of Sub 8) formed DRE 12, a
disregarded entity. -
FSub 2 (or a disregarded entity of FSub 2) formed Controlled 3, which initially is
classified as a disregarded entity. -
Sub 8 will transfer all the equity interests in DRE 12 (or the equity interests in a
disregarded entity that owns the equity interests in DRE 12) to FSub 1 for either
FSub 1 shares or de minimis cash consideration. -
Certain SpinCo Business assets and liabilities, any corporations holding SpinCo
Business assets and liabilities, and any other newly formed disregarded entities
holding SpinCo Business assets and liabilities, in each case, that are owned by
FSub 1 (or FSub 1’s subsidiaries), will be transferred from FSub 1, or subsidiaries
owned directly or indirectly by FSub 1, to DRE 12. -
DRE 12 will elect to be classified as a corporation for federal income tax purposes.
-
FSub 1 (or a disregarded entity of FSub 1) will sell all the issued and outstanding
equity interests in DRE 12 to Distributing in exchange for cash or a note receivable
(together with Steps 5 and 6, the “DRE 12 Steps”). -
Certain SpinCo Business assets and liabilities, including the stock of existing and
newly formed entities holding SpinCo Business assets and liabilities, will be
transferred from FSub 2, or disregarded entities and subsidiaries owned directly and
indirectly by FSub 2, to Controlled 3 (or a disregarded entity owned by Controlled 3). -
Controlled 3 will elect to be classified as a corporation for federal tax purposes (the
“Controlled 3 CTB Election”). -
FSub 2 will distribute all the issued and outstanding equity interests in Controlled 3
to Sub 8 (the “Controlled 3 Distribution”). -
Sub 8 will contribute all the issued and outstanding equity interests in Controlled 3 to
Controlled 2 (the “First Controlled 2 Contribution”). -
Sub 8 will distribute all the issued and outstanding equity interests in Controlled 2 to
Sub 7 (the “First Controlled 2 Distribution”). -
Sub 7 will distribute all the issued and outstanding equity interests in Controlled 2 to
Sub 1 in complete redemption of Sub 7 preferred stock and partial redemption of
Sub 7 common stock directly held by Sub 1 (the “Second Controlled 2 Distribution”). -
Sub 1 will contribute certain SpinCo Business assets and liabilities (including one or
more entities that hold assets and liabilities related to the SpinCo Business) to
Controlled 2 (the “Second Controlled 2 Contribution”). -
Sub 1 will distribute all the issued and outstanding equity interests in Controlled 2 to
Distributing (the “Third Controlled 2 Distribution”). -
Controlled 1 will borrow approximately $l from third-party lenders or investors.
-
Distributing will contribute all the issued and outstanding equity interests in
Controlled 2 and DRE 12, and any other SpinCo Business assets (including interests
in certain other subsidiaries that are owned by Distributing and are engaged in the
SpinCo Business) to Controlled 1 in exchange for Controlled 1 shares, all or a
portion of the $l of cash borrowed pursuant to Step 16 above, plus any cash
transferred by Controlled 1 to Distributing pursuant to the Cash Adjustment and
minus any cash transferred by Distributing to Controlled 1 pursuant to the Cash
Adjustment, and the assumption of certain SpinCo Business liabilities (the
“Controlled 1 Contribution”). Distributing will hold the cash received from Controlled
1 in segregated accounts, including segregated demand deposit accounts, money
market fund accounts, and/or time deposits, until the cash is used to pay down
Distributing Debt and repurchase shares of Distributing Common Stock, other than
those held by DRE 1, as described in Step 23. For this purpose, a “segregated
account” includes a new account established to hold the cash received from
Controlled 1 or an existing Distributing account with a zero (or minimal) balance prior
to this step.
-
Distributing Common Stock held by the Rabbi Trusts will be exchanged for a class of
equity interest in Distributing that does not participate in the Controlled 1 Distribution
(as described in Step 19, below) (the “Recapitalization”). Upon consummation of the
Controlled 1 Distribution, the recapitalized shares are converted back into
Distributing Common Stock at a ratio determined pursuant to an anti-dilution formula
(the “Conversion”). Distributing will treat the Recapitalization and the Conversion as
a disregarded transaction for federal income tax purposes. -
Distributing will distribute all the issued and outstanding stock of Controlled 1 to
holders of Distributing Common Stock (including DRE 1) (such distribution,
excluding the distribution of shares to DRE 1, the “Controlled 1 Distribution” and
together with the Controlled 3 Distribution, First Controlled 2 Distribution, Second
Controlled 2 Distribution, and Third Controlled 2 Distribution, the “Distributions”). -
Pursuant to a legally binding commitment, Distributing will acquire for cash the
Controlled 1 stock distributed to DRE 1 in the Controlled 1 Distribution. -
Pursuant to a legally binding commitment, Distributing will transfer to Controlled 1
the Controlled 1 stock acquired from DRE 1 (in Step 20, above) for no consideration.
Controlled 1 will cancel the Controlled 1 stock it acquires from Distributing (this step,
together with Step 20 and the distribution of Controlled 1 stock to DRE 1 in Step 19,
the “DRE 1 Hook Stock Steps”). Distributing will treat the DRE 1 Hook Stock Steps
as a section 301 distribution of cash by Distributing to DRE 1. -
Immediately after Step 21, Merger Sub, a wholly owned subsidiary of Acquiring, will
merge with and into Controlled 1 with Controlled 1 surviving the merger (the
“Merger”). As consideration in the Merger, Controlled 1 shareholders will receive
solely Acquiring common stock except for any cash paid in lieu of fractional shares.
Under the terms of the Merger Agreement, each share of Controlled 1 stock issued
and outstanding immediately prior to the Merger will convert into the right to receive
a number of shares of Acquiring common stock equal to an exchange ratio resulting
in Distributing shareholders owning approximately i% of the combined company
(before accounting for the Overlapping Shareholders) and at least n% of the
combined company (when taking into account the Overlapping Shareholders). If the
exchange ratio would result in Distributing’s shareholders receiving less than n% of
the combined company (when taking into account the Overlapping Shareholders),
then certain adjustments (including a special dividend paid by Acquiring and/or a
reduction to the amount of cash distributed by Controlled 1 to Distributing) will be
made to bridge any shortfall. -
After the Controlled 1 Distribution (and within 12 months following the receipt by
Distributing of cash in the Controlled 1 Contribution), Distributing will use the cash
received from Controlled 1 to pay down a portion of Distributing Debt outstanding
and repurchase shares of Distributing Common Stock, other than the Hook Stock,
pursuant to a new or existing share repurchase program. -
Following Step 22 and before or after the completion of Step 23, Acquiring will
contribute all of the issued and outstanding stock of Controlled 1 to Acquiring Sub, a
member of the Acquiring consolidated group (such contribution, the “Acquiring Sub
Contribution”).In connection with the Proposed Transactions, Distributing (and/or one or moreof its direct or indirect subsidiaries) and Controlled 1 (and/or one or more of its direct or
indirect subsidiaries) will enter into agreements (the “Post-Separation Agreements”)
intended to govern certain of their relationships (and that of their respective
subsidiaries) following the consummation of the Proposed Transactions, and to manage
an orderly transition in the operation of the SpinCo Business. The Post-Separation
Agreements will include the Separation Agreement, Tax Matters Agreement, Transition
Services Agreement, Delayed Transfer Agreements, Regulatory Agreement, IP Matters
Agreement, Lease Agreements, Contract Manufacturing Agreements, and Reverse
Contract Manufacturing Agreements. Each of the Post-Separation Agreements will last
no longer than is necessary to achieve a successful separation of the SpinCo Business
and any payments made in connection with any of the Post-Separation Agreements that
occur more than 24 months after the Controlled 1 Distribution will be for fair market
value based on arm’s length terms.
The Share Repurchases
Distributing has historically had a share repurchase program pursuant to which it
repurchases shares of its common stock to achieve an appropriate capital structure.
Distributing expects to continue to repurchase shares of its common stock both before
and after the Proposed Transactions. All share repurchases by Distributing occurring
within the period beginning two years prior to, and ending two years after, the date of
the Proposed Transactions will have been made through (i) open market purchases
(including through an SEC Rule 10b5-1 plan or a purchase in compliance with SEC
Rule 10b-18), (ii) accelerated share repurchase (“ASR”) programs, (iii) one or more
tender offers open to all holders of Distributing Common Stock, or (iv) a combination
thereof (the “Distributing Share Repurchases”).
In addition, Acquiring may also engage in share repurchases following the
Proposed Transactions. All share repurchases by Acquiring occurring within the period
beginning on the date of the Merger and ending two years after the date of the
Separation will be made through (i) open market purchases (including through an SEC
Rule 10b5-1 plan or a purchase in compliance with SEC Rule 10b-18), (ii) ASR
programs, (iii) one or more tender offers open to all holders of Acquiring common stock,
or (iv) a combination thereof (the “Acquiring Share Repurchases” and together with the
Distributing Share Repurchases, the “Share Repurchases”).
The Overlap Counting Principles
For purposes of applying section 355(e)(3)(A)(iv) (the “Overlap Rule”) and the
methodology of the example in the 1998 legislative history of section 355(e)(3)(A)(iv)
(the “Net Decrease Methodology”) to determine the extent of Overlapping Shareholders
at the time of the Merger, Distributing will employ the principles described below (the
“Overlap Counting Principles”).
(i) Look-Through Approach. In applying the Overlap Rule and the Net Decrease
Methodology, Distributing will look through entities to the ultimate indirect owners
of Distributing Common Stock and Acquiring common stock, and will take into
account the identified actual overlap in the ultimate indirect ownership of
Distributing Common Stock and Acquiring common stock at that level, based on
actual knowledge, or if Distributing does not have actual knowledge, then based
upon the sources of proof described in paragraph (ii). Notwithstanding the
foregoing, in proving the identity of Overlapping Shareholders, and the extent of
their share ownership for purposes of applying the Overlap Rule and the Net
Decrease Methodology, Distributing will treat as the ultimate owner of Distributing
Common Stock and Acquiring common stock: (i) widely held investment vehicles
with public investors (such as a mutual fund or exchange traded fund); (ii) any
regulated investment company; (iii) any domestic pension trust described in
section 401(a) which is exempt from tax under section 501(a); (iv) any domestic
charitable organization described in section 501(c)(3) (including an endowment
or private foundation); (v) any state, local, or foreign government (or agency or
instrumentality thereof), including any fund ultimately owned by a government
and Fund A; and (vi) any foreign trust or pension plan (provided that the
beneficiaries of the trust or pension plan have a pro rata interest in the assets
thereof).
(ii) Sources of Proof of Overlapping Shareholders. For purposes of determining the
identity of, and number of shares owned by, the Overlapping Shareholders,
absent actual knowledge at the Relevant Time, Distributing will rely on
information that is “publicly available.” Information shall be deemed as publicly
available when it is available for viewing by the public. Publicly available
information shall include: (i) information filed pursuant to applicable federal
securities laws by institutional investment managers (SEC Forms 13F, 13D, and
13G) and registered management investment companies (SEC Form N-PORT
and SEC Form N-CSR) (together, “SEC Filings”); or (ii) information voluntarily
posted on the investor’s or the investment adviser’s website (“Website Posting”).
Distributing will rely on the Fund A Information for Fund A. In determining the
identity of, and number of shares owned by, Overlapping Shareholders,
Distributing shall rely on Overlapping Shareholder information from SEC Filings
or Website Postings at the Relevant Time, which may relate to stock ownership
on certain dates prior to the Relevant Time.
(iii) Reliance on Actual Knowledge. For purposes of these Overlap Counting
Principles, actual knowledge means the actual knowledge of the Chief Financial
Officer or General Counsel of either Distributing or Acquiring. To determine
Overlapping Shareholder information that is not publicly available on appropriate
SEC Filings or Website Postings at the Relevant Time, Distributing may obtain
actual knowledge as of the Relevant Time through written or oral confirmation
from a shareholder (or an authorized representative thereof) with regard to: (i) its
ownership of Distributing Common Stock and Acquiring common stock, (ii)
whether the beneficiaries or owners of a shareholder have direct or indirect pro
rata interests in the shareholder’s assets, or (iii) any other relevant information.
(iv) Verification. Distributing and Acquiring will compare the search results for each
investor showing overlap against any shareholding information on the investor’s
website and its most recent securities law filings (if any) filed prior to the Relevant
Time reporting historic ownership in an attempt to find the most current and
accurate data. If there is a discrepancy that arises through the verification
process that contradicts the information resulting from the search results, the
most recent information will be used; if dates are the same, then the lower
ownership number will be used (i.e., providing a conservative view on the amount
of overlap), in each case, unless Distributing or Acquiring knows that such more
recent information or lower ownership number is incorrect.
Representations
The following representations have been made with respect to the Proposed
Transactions:
With respect to the Controlled 3 CTB Election and Controlled 3 Distribution
Except as otherwise provided below, Distributing has made all the representations in
Section 3 of the Appendix of Rev. Proc. 2017-52 with respect to the Controlled 3 CTB
Election and Controlled 3 Distribution in the form set forth therein.
-
Distributing has made the following alternative representations: 3(a), 8(b), 11(a),
22(a), 31(a), and 41(a). -
Distributing did not make following representations, which do not apply to the
Controlled 3 CTB Election and Controlled 3 Distribution: 7, 24, 25, 40, and 43. -
Distributing did not make the following representations, which have been replaced
by representations in Rev. Proc. 2024-24: 2, 4, 17, 18, 19, 20, and 21. -
Distributing has made the following representations in lieu of Representations 14,15
and 29:
i. Immediately after the Distribution, the fair market value of the business assets of
each of FSub 2 and Controlled 3 will be greater than 80 percent of the fair market
value of its total assets. For this purpose, the term “business assets” of a
corporation means its gross assets used in one or more businesses. Such assets
include cash and cash equivalents held as a reasonable amount of working
capital for one or more businesses. Such assets also include assets required (by
binding commitment or legal requirement) to be held to provide for exigencies
related to a business or for regulatory purposes with respect to a business.
ii. There is no plan or intention by the shareholders or securityholders of FSub 2 to
sell, exchange, transfer by gift, or otherwise dispose of any of their stock in, or
securities of, either FSub 2 or Controlled 3 after the Proposed Transactions.
iii. There is no plan or intention by FSub 2 or Controlled 3, directly or through any
related person (within the meaning of section 267(b) or section 707(b)(1)), to
purchase any of its outstanding stock after the Proposed Transactions.
iv. There is no plan or intention to liquidate either FSub 2 or Controlled 3, to merge
either corporation with any other corporation, or to sell or otherwise dispose of
the assets of either corporation after the Proposed Transactions, except in the
ordinary course of business or sales and other dispositions of assets to members
of each corporation’s SAG, within the meaning of section 355(b)(3)(B).
v. There was no agreement, understanding, arrangement, or substantial
negotiations by one or more officers or directors acting on behalf of FSub 2 or
Controlled 3, by controlling shareholders of FSub 2 or Controlled 3, or by another
person or persons with the implicit or explicit permission of one or more of such
officers, directors or controlling shareholders at any point during the two-year
period ending on the date of the distribution regarding an acquisition of the stock
of either FSub 2 or Controlled 3 (including a predecessor or successor within the
meaning of Treas. Reg. § 1.355-8) or a similar acquisition, which acquisition has
occurred or will occur prior to or following the distribution, other than acquisitions
resulting from or in connection with the Merger.
-
In addition, Distributing has made the following modified representations:
Representation 32: No intercorporate debt will exist between FSub 2 and Controlled 3 at the time of, or subsequent to, the Controlled 3 Distribution, except for short- term accounts payable and accounts receivable arising in the ordinary course of business.Representation 33:
Any payments made in connection with all continuing transactions, if any, between FSub 2 and Controlled 3 that occur more than 24 months after the Controlled 3 Distribution will be for fair market value based on arm’s length terms.
Except as otherwise provided below, Distributing has made all the representations in
Section 3.02(3) of Rev. Proc. 2024-24 or provided adequate explanation for any
modifications or revisions with respect to the Controlled 3 CTB Election and Controlled
3 Distribution in the form set forth therein.
-
Distributing has made Alternative Representation 1(a).
-
Distributing did not make following representations, which do not apply to the
Controlled 3 CTB Election and Controlled 3 Distribution: 2, 3, 4, 5, 6, 17, 18, 19, 20,
25, 26, 27, 29, and 30. -
Distributing has made the following revised / modified representations:
Representation 15(a):
Other than with respect to any liabilities relating to intercompany financing or
trading transactions deemed assumed by Controlled 3 in connection with the
Controlled 3 CTB Election, no holder of a FSub 2 debt that will be satisfied with
section 361 consideration, or of a FSub 2 liability that will be assumed by
Controlled 3 (including a FSub 2 contingent liability), is a FSub 2 Related Person
or a Controlled 3 Related Person.
Representation 16:
Other than with respect to any liabilities relating to intercompany financing
or trading transactions deemed assumed by Controlled 3 in connection with the
Controlled 3 CTB Election, no holder of a FSub 2 debt that will be satisfied with
section 361 consideration, or of other FSub 2 liability (including a FSub 2
contingent liability) that will be assumed by Controlled 3, will hold the debt or
other liability for the benefit of FSub 2, Controlled 3, a FSub 2 Related Person, or
a Controlled 3 Related Person.
Representation 21:
Other than with respect to trade payables related to Controlled 3’s business that
will be assumed or deemed assumed by Controlled 3 in connection with the
Controlled 3 Distribution, FSub 2 incurred each FSub 2 debt that will be satisfied
with Section 361 consideration, and each FSub 2 liability that will be assumed by
Controlled 3 (except with regard to any FSub 2 contingent liability), before the
Earliest Applicable Date.
With respect to the First Controlled 2 Contribution and First Controlled 2 Distribution
Except as otherwise provided below, Distributing has made all the
representations in Section 3 of the Appendix of Rev. Proc. 2017-52 with respect to the
First Controlled 2 Contribution and First Controlled 2 Distribution in the form set forth
therein.
-
Distributing has made the following alternative representations: 3(a), 8(a), 11(a),
22(a), 31(a), and 41(a). -
Distributing did not make the following representations, which do not apply to the
First Controlled 2 Contribution and First Controlled 2 Distribution: 7, 24, 25, and 40. -
Distributing did not make the following representations, which have been replaced
by representations in Rev. Proc. 2024-24: 2, 4, 17, 18, 19, 20, and 21. -
Distributing has made the following representations in lieu of Representations 14,15
and 29:
i. Immediately after the Distribution, the fair market value of the business assets of
each of Sub 8 and Controlled 2 will be greater than 80 percent of the fair market
value of its total assets. For this purpose, the term “business assets” of a
corporation means its gross assets used in one or more businesses. Such
assets include cash and cash equivalents held as a reasonable amount of
working capital for one or more businesses. Such assets also include assets
required (by binding commitment or legal requirement) to be held to provide for
exigencies related to a business or for regulatory purposes with respect to a
business. Total assets do not include any intercompany debt between members
of such corporation’s affiliated group (as defined in section 1504(a)).
ii. There is no plan or intention by the shareholders or securityholders of Sub 8 to
sell, exchange, transfer by gift, or otherwise dispose of any of their stock in, or
securities of, either Sub 8 or Controlled 2 after the Proposed Transactions.
iii. There is no plan or intention by Sub 8 or Controlled 2, directly or through any
related person (within the meaning of section 267(b) or section 707(b)(1)), to
purchase any of its outstanding stock after the Proposed Transactions.
iv. There is no plan or intention to liquidate either Sub 8 or Controlled 2, to merge
either corporation with any other corporation, or to sell or otherwise dispose of
the assets of either corporation after the Proposed Transactions, except in the
ordinary course of business or sales and other dispositions of assets to
members of each corporation’s SAG, within the meaning of section 355(b)(3)(B).
v. There was no agreement, understanding, arrangement, or substantial
negotiations by one or more officers or directors acting on behalf of Sub 8 or
Controlled 2, by controlling shareholders of Sub 8 or Controlled 2, or by another
person or persons with the implicit or explicit permission of one or more of such
officers, directors or controlling shareholders at any point during the two-year
period ending on the date of the distribution regarding an acquisition of the stock
of either Sub 8 or Controlled 2 (including a predecessor or successor within the
meaning of Treas. Reg. § 1.355-8) or a similar acquisition, which acquisition has
occurred or will occur prior to or following the distribution, other than acquisitions
resulting from or in connection with the Merger.
-
In addition, Distributing has made the following modified representations:
Representation 32:
No intercorporate debt will exist between Sub 8 and Controlled 2 at the time of, or subsequent to, the First Controlled 2 Distribution, except for short-term accounts payable and accounts receivable arising in the ordinary course of business.Representation 33:
Any payments made in connection with all continuing transactions, if any, between Sub 8 and Controlled 2 that occur more than 24 months after the First Controlled 2 Distribution will be for fair market value based on arm’s length terms.
Except as otherwise provided below, Distributing has made all the representations in
Section 3.02(3) of Rev. Proc. 2024-24 or provided adequate explanation for any
modifications or revisions with respect to the First Controlled 2 Contribution and First
Controlled 2 Distribution in the form set forth therein.
-
Distributing has made Alternative Representation 1(a).
-
Distributing did not make the following representations, which do not apply to the
First Controlled 2 Contribution and First Controlled 2 Distribution: 2, 3, 4, 5, 6, 13,
14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 25, 26, 27, 29, 30, 31, 32, 33, 34, 35, 36, and
37.
With respect to the Second Controlled 2 Distribution
Except as otherwise provided below, Distributing has made all the representations in
Section 3 of the Appendix of Rev. Proc. 2017-52 with respect to the Second Controlled
2 Distribution in the form set forth therein.
-
Distributing has made the following alternative representations: 3(a), 8(a), 11(a),
22(a), 31(a), and 41(a). -
Distributing did not make the following representations, which do not apply to the
Second Controlled 2 Distribution: 6, 24, 25, 26, and 40. -
Distributing did not make the following representations, which have been replaced
by representations in Rev. Proc. 2024-24: 2, 4, 17, 18, 19, 20, and 21. -
Distributing has made the following representations in lieu of Representations 14,15
and 29:
i. Immediately after the Distribution, the fair market value of the business assets of
each of Sub 7 and Controlled 2 will be greater than 80 percent of the fair market
value of its total assets. For this purpose, the term “business assets” of a
corporation means its gross assets used in one or more businesses. Such assets
include cash and cash equivalents held as a reasonable amount of working
capital for one or more businesses. Such assets also include assets required (by
binding commitment or legal requirement) to be held to provide for exigencies
related to a business or for regulatory purposes with respect to a business. Total
assets do not include any intercompany debt between members of such
corporation’s affiliated group (as defined in section 1504(a)).
ii. There is no plan or intention by the shareholders or securityholders of Sub 7 to
sell, exchange, transfer by gift, or otherwise dispose of any of their stock in, or
securities of, either Sub 7 or Controlled 2 after the Proposed Transactions.
iii. There is no plan or intention by Sub 7 or Controlled 2, directly or through any
related person (within the meaning of section 267(b) or section 707(b)(1)), to
purchase any of its outstanding stock after the Proposed Transactions.
iv. There is no plan or intention to liquidate either Sub 7 or Controlled 2, to merge
either corporation with any other corporation, or to sell or otherwise dispose of
the assets of either corporation after the Proposed Transactions, except in the
ordinary course of business or sales and other dispositions of assets to members
of each corporation’s SAG, within the meaning of section 355(b)(3)(B).
v. There was no agreement, understanding, arrangement, or substantial
negotiations by one or more officers or directors acting on behalf of Sub 7 or
Controlled 2, by controlling shareholders of Sub 7 or Controlled 2, or by another
person or persons with the implicit or explicit permission of one or more of such
officers, directors or controlling shareholders at any point during the two-year
period ending on the date of the distribution regarding an acquisition of the stock
of either Sub 7 or Controlled 2 (including a predecessor or successor within the
meaning of Treas. Reg. § 1.355-8) or a similar acquisition, which acquisition has
occurred or will occur prior to or following the distribution, other than acquisitions
resulting from or in connection with the Merger.
- In addition, Distributing has made the following modified representations:
Representation 32
No intercorporate debt will exist between Sub 7 and Controlled 2 at the time of,
or subsequent to, the Second Controlled 2 Distribution, except for short-term
accounts payable and accounts receivable arising in the ordinary course of
business.
Representation 33
Any payments made in connection with all continuing transactions, if any,
between Sub 7 and Controlled 2 that occur more than 24 months after the
Second Controlled 2 Distribution will be for fair market value based on arm’s
length terms.
Except as otherwise provided below, Distributing has made all the representations in
Section 3.02(3) of Rev. Proc. 2024-24 or provided adequate explanation for any
modifications or revisions with respect to the Second Controlled 2 Distribution in the
form set forth therein.
-
Distributing has made Alternative Representation 1(a).
-
Distributing did not make the following representations, which do not apply to the
Second Controlled 2 Distribution: 2, 3, 4, 5, 6, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22,
23, 25, 26, 27, 29, 30, 31, 32, 33, 34, 35, 36, and 37.
With respect to the Second Controlled 2 Contribution and Third Controlled 2 Distribution
Except as otherwise provided below, Distributing has made all the representations in
Section 3 of the Appendix of Rev. Proc. 2017-52 with respect to the Second Controlled
2 Contribution and Third Controlled 2 Distribution in the form set forth therein.
-
Distributing has made the following alternative representations: 3(a), 8(a), 11(a),
22(a), 31(a), and 41(a). -
Distributing did not make following representations, which do not apply to the
Controlled 3 CTB Election and Controlled 3 Distribution: 7, 24, 25, and 40. -
Distributing did not make the following representations, which have been replaced
by representations in Rev. Proc. 2024-24: 2, 4, 17, 18, 19, 20, and 21. -
Distributing has made the following representations in lieu of representations 14,15
and 29:
i. Immediately after the Distribution, the fair market value of the business assets of
each of Sub 1 and Controlled 2 will be greater than 80 percent of the fair market
value of its total assets. For this purpose, the term “business assets” of a
corporation means its gross assets used in one or more businesses. Such
assets include cash and cash equivalents held as a reasonable amount of
working capital for one or more businesses. Such assets also include assets
required (by binding commitment or legal requirement) to be held to provide for
exigencies related to a business or for regulatory purposes with respect to a
business. Total assets do not include any intercompany debt between members
of such corporation’s affiliated group (as defined in section 1504(a)).
ii. There is no plan or intention by the shareholders or securityholders of Sub 1 to
sell, exchange, transfer by gift, or otherwise dispose of any of their stock in, or
securities of, either Sub 1 or Controlled 2 after the Proposed Transactions.
iii. There is no plan or intention by Sub 1 or Controlled 2, directly or through any
related person (within the meaning of section 267(b) or section 707(b)(1)), to
purchase any of its outstanding stock after the Proposed Transactions.
iv. There is no plan or intention to liquidate either Sub 1 or Controlled 2, to merge
either corporation with any other corporation, or to sell or otherwise dispose of
the assets of either corporation after the Proposed Transactions, except in the
ordinary course of business or sales and other dispositions of assets to members
of each corporation’s SAG, within the meaning of section 355(b)(3)(B).
v. There was no agreement, understanding, arrangement, or substantial
negotiations by one or more officers or directors acting on behalf of Sub 1 or
Controlled 2, by controlling shareholders of Sub 1 or Controlled 2, or by another
person or persons with the implicit or explicit permission of one or more of such
officers, directors or controlling shareholders at any point during the two-year
period ending on the date of the distribution regarding an acquisition of the stock
of either Sub 1 or Controlled 2 (including a predecessor or successor within the
meaning of Treas. Reg. § 1.355-8) or a similar acquisition, which acquisition has
occurred or will occur prior to or following the distribution, other than acquisitions
resulting from or in connection with the Merger.
- In addition, Distributing has made the following modified representations:
Representation 32:
No intercorporate debt will exist between Sub 1 and Controlled 2 at the time of,
or subsequent to, the Third Controlled 2 Distribution, except for short-term
accounts payable and accounts receivable arising in the ordinary course of
business.
Representation 33:
Any payments made in connection with all continuing transactions, if any,
between Sub 1 and Controlled 2 that occur more than 24 months after the Third
Controlled 2 Distribution will be for fair market value based on arm’s length
terms.
Except as otherwise provided below, Distributing has made all the representations in
Section 3.02(3) of Rev. Proc. 2024-24 or provided adequate explanation for any
modifications or revisions with respect to the Second Controlled 2 Contribution and
Third Controlled 2 Distribution in the form set forth therein.
-
Distributing has made Alternative Representation 1(a).
-
Distributing did not make following representations, which do not apply to the
Second Controlled 2 Contribution and Third Controlled 2 Distribution: 2, 3, 4, 5, 6,
17, 18, 19, 20, 25, 26, 27, 29, and 30. -
Distributing has made the following revised / modified representations:
Representation 15(a):
Other than with respect to any liabilities relating to intercompany financing or
trading transactions deemed assumed by Controlled 2 in connection with the
Second Controlled 2 Contribution, no holder of a Sub 1 debt that will be
satisfied with section 361 consideration, or of a Sub 1 liability that will be
assumed by Controlled 2 (including a Sub 1 contingent liability), is a Sub 1
Related Person or a Controlled 2 Related Person.
Representation 16:
Other than with respect to any liabilities relating to intercompany financing or
trading transactions deemed assumed by Controlled 2 in connection with the
Second Controlled 2 Contribution, no holder of a Sub 1 debt that will be
satisfied with section 361 consideration, or of other Sub 1 liability (including a
Sub 1 contingent liability) that will be assumed by Controlled 2, will hold the
debt or other liability for the benefit of Sub 1, Controlled 2, a Sub 1 Related
Person, or a Controlled 2 Related Person.
Representation 21:
Other than with respect to trade payables related to Controlled 2’s business
that will be assumed or deemed assumed by Controlled 2 in connection with
the Third Controlled 2 Distribution, Sub 1 incurred each Sub 1 debt that will be
satisfied with Section 361 consideration, and each Sub 1 liability that will be
assumed by Controlled 2 (except with regard to any Sub 1 contingent liability),
before the Earliest Applicable Date.
With respect to the Controlled 1 Contribution and Controlled 1 Distribution
Except as otherwise provided below, Distributing has made all the representations in
Section 3 of the Appendix of Rev. Proc. 2017-52 with respect to the Controlled 1
Contribution and Controlled 1 Distribution in the form set forth therein.
1. Distributing has made the following alternative representations: 3(a), 11(a), 22(a),
31(a), and 41(a).
-
Distributing did not make following representations, which do not apply to the
Controlled 1 Contribution and Controlled 1 Distribution: 7, 24, and 25. -
Distributing did not make the following representations, which have been replaced
by representations in Rev. Proc. 2024-24: 2, 4, 17, 18, 19, 20, and 21. -
Distributing has made the following representations in lieu of 14,15 and 29:
i. Immediately after the Distribution, the fair market value of the business assets of
each of Distributing and Controlled 1 will be greater than 80 percent of the fair
market value of its total assets. For this purpose, the term “business assets” of a
corporation means its gross assets used in one or more businesses. Such assets
include cash and cash equivalents held as a reasonable amount of working
capital for one or more businesses. Such assets also include assets required (by
binding commitment or legal requirement) to be held to provide for exigencies
related to a business or for regulatory purposes with respect to a business.
ii. To the knowledge of Distributing’s management, there is no plan or intention by
the shareholders or security holders of Distributing to sell, exchange, transfer by
gift, or otherwise dispose of any of their stock in, or securities of, either
Distributing or Controlled 1 after the Proposed Transactions, other than (i)
pursuant to the steps of the Proposed Transactions and (ii) through the public
trading of Distributing stock on an established market.
iii. To the knowledge of Distributing’s management, there is no plan or intention by
the shareholders or security holders of Controlled 1 to sell, exchange, transfer by
gift, or otherwise dispose of any of their stock in, or securities of Acquiring after
the Proposed Transactions, other than (i) through the public trading of Acquiring
stock on an established market; and (ii) sales by the distribution agent in the
Merger of aggregated fractional shares of Acquiring stock that Controlled 1
shareholders would otherwise be entitled to receive.
iv. There is no plan or intention by Distributing or Controlled 1, directly or through
any related person (within the meaning of section 267(b) or section 707(b)(1)), to
purchase any of its outstanding stock after the Proposed Transactions, other
than through stock purchases meeting the requirements set forth below:
1. Any Share Repurchase will be motivated by a business purpose, and the
stock that will be repurchased by Distributing or Controlled 1, or acquired by
a counterparty pursuant to an ASR, will be widely held;
2. To the extent that any Share Repurchase is made on the open market
(including through a U.S. Securities and Exchange Commission (“SEC”)
Rule 10b5-1 plan under the Securities Exchange Act of 1934 (15 U.S.C. 78)
(“Exchange Act”), a purchase in compliance with SEC Rule 10b-18 of the
Exchange Act, or a tender offer), Distributing or Controlled 1, as applicable,
does not expect to know the identity of any shareholder from which stock
will be repurchased. To the extent that any Share Repurchase is made
through an ASR, Distributing or Controlled 1, as applicable, does not expect
to know with certainty the identity of any shareholder from which stock is
borrowed or purchased by each counterparty that participates in such ASR;
3. There is no plan or intention that the aggregate amount of stock purchased
or acquired through Share Repurchases will equal or exceed 20 percent of
the outstanding stock of Distributing or Controlled 1, as applicable; and
4. No Share Repurchase will be motivated to any extent by a desire to
increase or decrease the ownership percentage of any particular
shareholder or group of shareholders.
v. There is no plan or intention to liquidate either Distributing or Controlled 1, to
merge either corporation with any other corporation, or to sell or otherwise
dispose of the assets of either corporation after the Proposed Transactions,
except in the ordinary course of business or sales and other dispositions of
assets to members of each corporation’s SAG, within the meaning of section
355(b)(3)(B).
vi. There was no agreement, understanding, arrangement, or substantial
negotiations by one or more officers or directors acting on behalf of Distributing
or Controlled 1, by controlling shareholders of Distributing or Controlled 1, or by
another person or persons with the implicit or explicit permission of one or more
of such officers, directors or controlling shareholders at any point during the two-
year period ending on the date of the distribution regarding an acquisition of the
stock of either Distributing or Controlled 1 (including a predecessor or successor
within the meaning of Treas. Reg. § 1.355-8) or a similar acquisition, which
acquisition has occurred or will occur prior to or following the distribution, other
than acquisitions resulting from or in connection with the Merger.
- In addition, Distributing has made the following modified representations:
Representation 5:
None of the Controlled 1 stock, Controlled 1 securities, or Other Property to be
distributed in the Distribution will be received in any capacity other than that of
a shareholder of Distributing, except for Other Property received by Distributing,
which may be transferred to creditors of Distributing Debt pursuant to the plan
of reorganization.
Representations 8(a) and 8(b):
Distributing has securities outstanding, but it will not distribute Controlled 1
stock, Controlled 1 securities or Other Property to any holder of such securities
in the Distribution, in satisfaction thereof, except for Other Property received by
Distributing, which may be transferred to Distributing’s security holders
pursuant to the plan of reorganization.
Representation 32:
No intercorporate debt will exist between Distributing and Controlled 1 at the
time of, or subsequent to, the Controlled 1 Distribution, except for short-term
accounts payable and accounts receivable arising in the ordinary course of
business.
Representation 33:
Any payments made in connection with all continuing transactions, if any,
between Distributing and Controlled 1 that occur more than 24 months after the
Distribution will be for fair market value based on arm’s length terms.
Representation 35:
The payment of cash in lieu of fractional shares of Controlled 1 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 1 (with the possible
exception of shareholders who hold Distributing stock in multiple accounts or
with multiple brokers).
Except as otherwise provided below, Distributing has made all the representations in
Section 3.02(3) of Rev. Proc. 2024-24 or provided adequate explanation for any
modifications or revisions with respect to the Controlled 1 Contribution and Controlled 1
Distribution in the form set forth therein.
-
Distributing has made Alternative Representation 1(a) and Alternative
Representation 17(a). -
Distributing did not make following representations, which do not apply to the
Controlled 1 Contribution and Controlled 1 Distribution: 2, 3, 4, 5, 6, 18, 19, 20, 26,
and 29. -
Distributing has made the following revised / modified representations:
Representations 15(a) and 15(b):
Other than with respect to any liabilities relating to intercompany financing or
trading transactions deemed assumed by Controlled 1 in connection with the
Controlled 1 Contribution, no holder of a Distributing Debt that will be satisfied
with section 361 consideration, or of a Distributing liability that will be assumed
by Controlled 1 (including a Distributing contingent liability), is a Distributing
Related Person or a Controlled 1 Related Person.
Representation 16:
Other than with respect to any liabilities relating to intercompany financing or
trading transactions deemed assumed by Controlled 1 in connection with the
Controlled 1 Contribution, no holder of a Distributing Debt that will be satisfied
with section 361 consideration, or of other Distributing liability (including a
Distributing contingent liability) that will be assumed by Controlled 1, will hold
the debt or other liability for the benefit of Distributing, Controlled 1, a
Distributing Related Person, or a Controlled 1 Related Person.
Representation 21:
Other than with respect to trade payables related to Controlled 1’s business
that will be assumed or deemed assumed by Controlled 1 in connection with
the Controlled 1 Distribution, Distributing incurred each Distributing debt that
will be satisfied with Section 361 consideration, and each Distributing liability
that will be assumed by Controlled 1 (except with regard to any Distributing
contingent liability), before the Earliest Applicable Date.
Representation 30:
Neither Distributing nor any Distributing Related Person (determined
immediately after the Control Distribution), will replace during the period
beginning on the Earliest Applicable Date and ending on the date Distributing
completes the transfer of Section 361 consideration to its creditors, directly or
indirectly, any Amount of Distributing Debt that will be satisfied with Section 361
Consideration with borrowing that Distributing or any Distributing Related
Person (determined immediately after the Earliest Applicable Date) expects or
is committed to, directly or indirectly, before the Earliest Applicable Date, other
than the Borrowings.
Additional Representations
Distributing has made the following additional representations:
-
Distributing expects that FSub 1 and each other member of the Distributing Group
that transfers SpinCo Business assets and liabilities to DRE 12 in the DRE 12 Steps
will each recognize net gain (and no loss) as a result of such transfers. -
Distributing does not expect any gain recognized as a result of the transfer of
SpinCo Business assets and liabilities in the DRE 12 Steps will cause the adjusted
tax basis in the stock of any member of the Distributing Group to exceed the fair
market value of such stock. -
Distributing expects that, at the time of the Controlled 1 Distribution, the gross and
net assets transferred to DRE 12 (and DREs owned by DRE 12) in the DRE 12
Steps will represent less than m% of the aggregate fair market value of the gross
and net assets, respectively, of Controlled 1’s separate affiliated group within the
meaning of section 355(b)(3)(B). -
The assets and liabilities transferred in the DRE 12 Steps will be principally
composed of assets and liabilities related to Business F. -
Distributing has no plan or intention to dispose of the stock of FSub 1 or any other
member of the Distributing Group that will transfer (or be treated as transferring
through a DRE) assets and liabilities to DRE 12 in the DRE 12 Steps, other than a
transfer of such stock to a member of the Distributing Group in which any additional
basis in such stock resulting from the transfers would not be utilized to reduce the
amount of income or gain (or increase the amount of loss) recognized by the
transferor. -
The Merger is intended to qualify as a reorganization pursuant to section 368(a) in
which no gain or loss is recognized (except with respect to the receipt of cash in lieu
of fractional shares of Acquiring stock). -
The Controlled 3 Distribution is subject to Treas. Reg. § 1.367(b)-3(c).
RulingsBased solely on the information submitted and the representations set forth
above, we rule as follows:
The Controlled 3 CTB Election and Controlled 3 Distribution
-
The Controlled 3 CTB Election, together with the Controlled 3 Distribution, will be a
reorganization within the meaning of section 368(a)(1)(D). FSub 2 and Controlled 3
will each be a “party to a reorganization” under section 368(b). -
No gain or loss will be recognized by FSub 2 on the Controlled 3 CTB Election.
Section 361(a); section 357(a). -
No gain or loss will be recognized by Controlled 3 on the Controlled 3 CTB Election.
Section 1032(a). -
The basis in each asset deemed received by Controlled 3 as a result of the
Controlled 3 CTB Election will be equal to the basis of that asset in FSub 2’s hands
immediately before the deemed transfer. Section 362(b). -
The holding period in each asset deemed received by Controlled 3 as a result of the
Controlled 3 CTB Election will include the period during which FSub 2 held that
asset. Section 1223(2). -
No gain or loss will be recognized by FSub 2 upon the Controlled 3 Distribution.
Section 361(c). -
No gain or loss will be recognized by (and no amount will be included in the income
of) Sub 8 upon the receipt of Controlled 3 stock in the Controlled 3 Distribution.
Section 355(a). -
The aggregate adjusted basis of FSub 2 stock and Controlled 3 stock in the hands of
Sub 8 immediately after the Controlled 3 Distribution will be the same as Sub 8’s
basis in the FSub 2 stock with respect to which such distribution is made, allocated
in proportion to the fair market values of the FSub 2 stock and Controlled 3 stock
immediately following the Controlled 3 Distribution. Section 358(a), (b) and (c);
Treas. Reg. § 1.358-1(a). -
Sub 8’s holding period in the Controlled 3 stock received in the Controlled 3
Distribution will include the period during which Sub 8 held the FSub 2 stock with
respect to which the distribution of Controlled 3 stock is made, provided that such
FSub 2 stock is held a capital asset on the date of the Controlled 3 Distribution.
Section 1223(1). -
FSub 2’s earnings and profits, if any, will be allocated between FSub 2 and
Controlled 3 in accordance with section 312(h) and Treas. Reg. § 1.312-10(a).
The First Controlled 2 Contribution and First Controlled 2 Distribution
-
The First Controlled 2 Contribution, together with the First Controlled 2 Distribution,
will be a reorganization within the meaning of section 368(a)(1)(D). Sub 8 and
Controlled 2 will each be a “party to a reorganization” under section 368(b). -
No gain or loss will be recognized by Sub 8 upon the First Controlled 2 Contribution.
Section 361(a). -
No gain or loss will be recognized by Controlled 2 on the First Controlled 2
Contribution. Section 1032(a). -
The basis in each asset received (or deemed received) by Controlled 2 in the First
Controlled 2 Contribution will be equal to the basis of that asset in Sub 8’s hands
immediately before the transfer. Section 362(b). -
The holding period in each asset received (or deemed received) by Controlled 2 in
the First Controlled 2 Contribution will include the period during which Sub 8 held
that asset. Section 1223(2). -
No gain or loss will be recognized by Sub 8 upon the First Controlled 2 Distribution.
Section 361(c). -
No gain or loss will be recognized by (and no amount will be included in the income
of) Sub 7 upon the receipt of Controlled 2 stock in the First Controlled 2 Distribution.
Section 355(a). -
The aggregate adjusted basis of Sub 8 stock and Controlled 2 stock in the hands of
Sub 7 immediately after the First Controlled 2 Distribution will be the same as Sub
7’s basis in the Sub 8 stock with respect to which such distribution is made,
allocated in proportion to the fair market values of the Sub 8 stock and Controlled 2
stock immediately following the First Controlled 2 Distribution. Section 358(a), (b)
and (c); Treas. Reg. § 1.358-1(a). -
Sub 7’s holding period in the Controlled 2 stock received in the First Controlled 2
Distribution will include the period during which Sub 7 held the Sub 8 stock with
respect to which the distribution of Controlled 2 stock is made, provided that such
Sub 8 stock is held a capital asset on the date of the First Controlled 2 Distribution.
Section 1223(1).
- Sub 8’s earnings and profits, if any, will be allocated between Sub 8 and Controlled
2 in accordance with section 312(h) and Treas. Reg. § 1.312-10(a).
The Second Controlled 2 Distribution
-
No gain or loss will be recognized by Sub 7 upon the distribution of Controlled 2
stock in the Second Controlled 2 Distribution. Section 355(c). -
No gain or loss will be recognized by (and no amount will be included in the income
of) Sub 1 in the Second Controlled 2 Distribution. Section 355(a). -
Sub 1’s basis in the stock of Controlled 2 received in the Second Controlled 2
Distribution will be equal to the Sub 7 stock exchanged therefor. Section 358(b);
Treas. Reg. § 1.358-2(a). -
Sub 1’s holding period in the Controlled 2 stock received in the Second Controlled 2
Distribution will include the period during which Sub 1 held the Sub 7 stock
exchanged therefor, provided that such Sub 7 stock is held a capital asset on the
date of the Second Controlled 2 Distribution. Section 1223(1). -
Sub 7’s earnings and profits, if any, and Controlled 2’s earnings and profits, if any,
will be adjusted in accordance with section 312(h) and Treas. Reg. § 1.312-10(b).
The Second Controlled 2 Contribution and Third Controlled 2 Distribution
-
The Second Controlled 2 Contribution, together with the Third Controlled 2
Distribution, will be a reorganization within the meaning of section 368(a)(1)(D). Sub
1 and Controlled 2 will each be a “party to a reorganization” under section 368(b). -
No gain or loss will be recognized by Sub 1 upon the Second Controlled 2
Contribution. Section 361(a); section 357(a). -
No gain or loss will be recognized by Controlled 2 on the Second Controlled 2
Contribution. Section 1032(a). -
The basis in each asset received (or deemed received) by Controlled 2 in the
Second Controlled 2 Contribution will be equal to the basis of that asset in Sub 1’s
hands immediately before the transfer. Section 362(b). -
The holding period in each asset received (or deemed received) by Controlled 2 in
the Second Controlled 2 Contribution will include the period during which Sub 1 held
that asset. Section 1223(2). -
No gain or loss will be recognized by Sub 1 upon the Third Controlled 2 Distribution.
Section 361(c). -
No gain or loss will be recognized by (and no amount will be included in the income
of) Distributing upon the Third Controlled 2 Distribution. Section 355(a). -
The aggregate adjusted basis of Sub 1 stock and Controlled 2 stock in the hands of
Distributing immediately after the Third Controlled 2 Distribution will be the same as
Distributing’s basis in the Sub 1 stock with respect to which such distribution is
made, allocated in proportion to the fair market values of the Sub 1 stock and
Controlled 2 stock immediately following the Third Controlled 2 Distribution. Section
358(a), (b) and (c); Treas. Reg. § 1.358-1(a). -
Distributing’s holding period in the Controlled 2 stock received in the Third Controlled
2 Distribution will include the period during which Distributing held the Sub 1 stock
with respect to which the distribution of Controlled 2 stock is made, provided that
such Sub 1 stock is held a capital asset on the date of the Third Controlled 2
Distribution. Section 1223(1). -
Sub 1’s earnings and profits, if any, will be allocated between Sub 1 and Controlled
2 in accordance with section 312(h) and Treas. Reg. § 1.312-10(a).
The Controlled 1 Contribution and Controlled 1 Distribution
-
The Controlled 1 Contribution, together with the Controlled 1 Distribution, will be a
reorganization within the meaning of section 368(a)(1)(D). Distributing and
Controlled 1 will each be a “party to a reorganization” under section 368(b). -
No gain or loss will be recognized by Distributing upon the Controlled 1 Contribution.
Section 361(a); section 361(b); section 357(a). -
No gain or loss will be recognized by Controlled 1 on the Controlled 1 Contribution.
Section 1032(a). -
The basis in each asset received (or deemed received) by Controlled 1 in the
Controlled 1 Contribution will be equal to the basis of that asset in Distributing’s
hands immediately before the transfer. Section 362(b). -
The holding period in each asset received (or deemed received) by Controlled 1 in
the Controlled 1 Contribution will include the period during which Distributing held
that asset. Section 1223(2). -
No gain or loss will be recognized by Distributing upon the Controlled 1 Distribution.
Section 361(c). -
No gain or loss will be recognized by (and no amount will be included in the income
of) holders of Distributing Common Stock upon the Controlled 1 Distribution. Section
355(a). -
The aggregate adjusted basis of the Distributing Common Stock and Controlled 1
stock in the hands of a holder of Distributing Common Stock immediately after the
Controlled 1 Distribution will be the same as such shareholder’s basis in the
Distributing Common Stock with respect to which such distribution is made,
allocated in proportion to the fair market values of the Distributing Common Stock
and Controlled 1 stock immediately following the Controlled 1 Distribution. Section
358(a), (b) and (c); Treas. Reg. § 1.358-1(a). -
If a holder of Distributing Common Stock that purchased or acquired shares on
different dates or at different prices is not able to identify which particular share of
Controlled 1 stock is received as a distribution with respect to a particular share of
Distributing Common Stock, the holder may designate which particular share of
Controlled 1 stock is received as a distribution with respect to a particular share of
Distributing Common Stock, provided the designation is consistent with the terms of
the Controlled 1 Distribution. Treas. Reg. § 1.358-2(a)(2). -
The holding period of each holder of Distributing Common Stock in the Controlled 1
Stock received in the Controlled 1 Distribution will include the holding period of the
Distributing Common Stock with respect to which the distribution of the Controlled 1
stock is made, provided that such Distributing Common Stock is held as a capital
asset on the date of such Controlled 1 Distribution. Section 1223(1). -
Distributing’s earnings and profits, if any, will be allocated between Distributing and
Controlled 1 in accordance with section 312(h) and Treas. Reg. §§ 1.312-10(a) and
1.1502-33(e)(3). -
Distributing may employ the Overlap Counting Principles in applying the Overlap
Rule and the Net Decrease Methodology to the Merger. -
To the extent that the Share Repurchases are treated as part of a plan (or series of
related transactions) with the Controlled 1 Distribution for purposes of section
355(e), the Share Repurchases will be treated as being made from all “Public
Shareholders” (i.e., shareholders that are not a “controlling shareholder” or “ten-
percent shareholder,” within the meaning of Treas. Reg. §§ 1.355-7(h)(3) and (14),
respectively) of Distributing or Acquiring, as applicable, on a pro rata basis for
purposes of testing the effect of the Share Repurchases on the Controlled 1
Distribution under section 355(e).
For purposes of this Ruling, each shareholder of Distributing or Acquiring, as
applicable, will be treated as a Public Shareholder with respect to any Share
Repurchases that occur on or prior to five business days after either (1) actual
knowledge of the Chief Financial Officer or General Counsel of Distributing or
Acquiring, as applicable, of the existence of a shareholder that is not a Public
Shareholder or (2) the filing of a Schedule 13D, Schedule 13G, Form 3, or Form 4,
indicating a shareholder of Distributing or Acquiring, as applicable, holds enough
shares to be considered a “five-percent shareholder” within the meaning of Treas.
Reg. § 1.355-7(h)(8) (and it actively participates in the management or operation of
the repurchasing corporation as described in Treas. Reg. § 1.355-7(h)(3)) or a “ten-
percent shareholder” within the meaning of Treas. Reg. § 1.355-7(h)(14). For
purposes of determining whether a “ten-percent shareholder” within the meaning of
Treas. Reg. § 1.355-7(h)(14) exists, Distributing and Acquiring, as applicable, may
disregard a Schedule 13G unless Item 6 reports such a shareholder or is left blank,
or the filer discloses its status as a “ten-percent shareholder” within the meaning of
Treas. Reg. § 1.355-7(h)(14) on SEC Form 3 or SEC Form 4.
-
The receipt of cash by holders of Controlled 1 shares in lieu of a fractional share of
Acquiring common stock will be treated for federal income tax purposes as if the
fractional share had been received by the holder as part of the Merger and then had
been disposed of by the holder for the amount of cash in a sale or exchange
pursuant to which gain or loss is recognized under section 1001. For purposes of
section 355(e), the sale of fractional shares of Acquiring common stock in
connection with the Merger will not be treated as an acquisition that is part of a plan
(or series of related transactions) that includes the Controlled 1 Distribution. -
The Cash Adjustment payment made between Distributing and Controlled 1 will be
characterized as if such payment had occurred immediately before the Controlled
1 Distribution pursuant to the Controlled 1 Contribution. See Arrowsmith v.
Commissioner, 344 U.S. 6 (1952) and Rev. Rul. 83-73, 1983-1 C.B. 84.CaveatsExcept as expressly provided herein, no opinion is expressed or implied
concerning the tax treatment of the Proposed Transactions under any other provisions
of the Code or regulations or the tax treatment of any conditions existing at the time of,
or effects resulting from, the Proposed Transactions that are not specifically addressed
by this letter. In particular, no opinion is expressed as to the tax treatment of the DRE
12 Steps, the DRE 1 Hook Stock Steps, the Recapitalization and Conversion, the
Merger, and the Acquiring Sub Contribution.Procedural StatementsThis ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.In accordance with the Power of Attorney on file with this office, a copy of thisletter is being sent to your authorized representative.
A copy of this ruling letter must be attached to any federal 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 ruling letter.Sincerely, Mark J. Weiss Chief, Branch 2 Office of Associate Chief Counsel (Corporate)
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