In this article:
- Mechanics of Section 355
- Framework for analysis
- Deviation from asserted corporate business purpose
- Post-spin events involving Distributing or Controlled assets
- Post-spin dispositions of Distributing or Controlled stock
- Post-spin issuance of new stock for cash
- Section 355 ruling policy
- Conclusion
- Excerpt from Framework for analysis:
There are many ways in which compliance with the requirements of Section 355 may be affected by post-spin changes in the stock ownership and/or asset composition of Distributing or Controlled. Importantly, the fact that a favorable Section 355 private letter ruling was obtained from the IRS will not necessarily preclude a subsequent audit challenge based on post-spin developments. In that regard, since 2003 all private letter rulings issued under Section 355 have been caveated (i.e., no ruling is given) with respect to the Business Purpose and the Non-Device Requirements and the determination of whether the spin is part of a Proscribed Plan under Section 355(e). Moreover, under its current ruling policy, the Service generally will not rule at all on Section 355 transactions, except in very limited circumstances.
Originally published in two parts by Corporate Taxation in the November/December 2013; January/February 2014 editions.
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