The terms of acquisition of the stock should also be described in detail. The transfer to the key employee should occur within one year of the distribution. Also, unless it would be prohibitively expensive, a significant amount of voting stock must be transferred. Providing a key employee with a stock interest in Distributing or Controlled may be a valid business purpose provided the taxpayer can demonstrate (1) a real and substantial corporate business purpose for the stock transfer, (2) why the individual is a key employee, and (3) why it is necessary to give the individual the type and amount of the proposed stock interest. Generally, the IRS will be taking a more active role in scrutinizing the motivations and purposes of the spin-off than in the past. 96-30 are discussed in the ensuing sections of this article. The specific corporate business purposes described in Appendix A of Rev. Losing a favorable tax status, such as an existing S corporation election, will be viewed as unduly expensive by the IRS. Overall, the IRS must be satisfied that there is a substantial corporate, non-federal tax purpose for the distribution, and that the purpose cannot be achieved through a nontaxable transaction that does not involve the distribution of Controlled stock, and which is neither impractical nor unduly expensive. Where the guidelines are not satisfied, taxpayers are invited to describe other corporate business purposes that may persuade the IRS to issue a private letter ruling. The guidelines do not contain an exclusive list of corporate business purposes. 96-3 establishing a "no-rule" position on certain corporate business purposes. Proc.9630 are the addition of guidelines, particularly Appendix A, which describe certain corporate business purposes supporting a favorable private letter ruling, request.
Two of the most significant changes in Rev. 96-30 is likely to increase the number of section 355 ruling requests. According to the IRS representatives, Rev. Taxpayers will continue to have pre-submission confereneces hut taxpayers may not meet directly with the committee. The IRS has created an eight-member committee to address novel and significant section 355 issues on a uniform and timely basis. The issuance of the revenue procedure has been accompanied by the participation of IRS representatives in discussions with practitioners in various public forums to disseminate widely the IRS's views on the guidelines. 9630, the IRS hopes to speed up the ruling process and narrow the gap between substantive law and the ruling process. Purpose and Effect of the Revenue Procedureīy providing more information through Rev.
Other changes made by the revenue procedure are discussed in the second part of this article, relating to obtaining a private ruling letter. 96-30 include (1) the detailed information, representations, and documentation required for establishing a valid corporate business purpose (2) a description of the facts and circumstances that may qualify the business purpose (3) a description of each purpose for the spinoff, not just the corporate business purpose (4) the required information and representations from foreign shareholders and foreign corporations and (5) the required information and representations where Distributing joins in filing a consolidated return.
Irc 355 how to#
96-30 as a whole, i.e., how to request a private letter ruling under its various provisions. This article is divided into two parts: Part I covers Rev. 8641, and related 1991 revenue procedures it also revokes a "no rule" Position on certain corporate business purposes, which was set forth in Rev. 8, supersedes the prior checklist questionnaire, Rev. The IRS recently revised its Section 355 Checklist Questionnaire to provide guidelines on the information, representations, and documentation that must be included in a ruling request for the nonrecognition of gain or loss on the distribution of stock or securities in a controlled corporation. Usually, the amount of tax at risk, the size and complexity of the transaction, and the presence of public shareholders require obtaining an advance ruling from the Internal Revenue Service when the taxDaver is planning a spin-off. This transaction is described below as the "distribution" or "spinoff."
Irc 355 code#
Section 355 of the Internal Revenue Code of 1986 provides for tax-free treatment of the separation of one or more active businesses through the distribution by a corporation (Distributing) of the stock or securities of a controlled corporation (Controlled), either existing or newly formed by the transfer of assets to it, by Distributing.
Irc 355 free#
MLA style: "The new Section 355 checklist questionnaire." The Free Library.
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