IRS Rules on Tax Consequences of Restructuring

Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact: * * *, ID No. * * *
Telephone Number: * * *

Release Date: 11/27/2020
Index Number: 351.00-00

Date: August 28, 2020

Refer Reply To: CC:CORP:B2 - PLR-105485-20

Legend

Parent = * * *
Sub 1 = * * *
Sub 2 = * * *
Sub 3 = * * *
Sub 4 = * * *
FSub 1 = * * *
FSub 2 = * * *
FSub 3 = * * * 
FSub 4 = * * * 
FSub 5 = * * * 
LLC 1 = * * * 
LLC 2 = * * * 
LLC 3 = * * * 
LLC 4 = * * * 
LLC 5 = * * * 
LLC 6 = * * * 
DRE 1 = * * * 
DRE 2 = * * * 
DRE 3 = * * * 
DRE 4 = * * * 
DRE 5 = * * * 
DRE 6 = * * * 
DRE 7 = * * * 
DRE 8 = * * * 
DRE 9 = * * * 
DRE 10 = * * * 
DRE 11 = * * * 
FPRS 1 = * * * 
FPRS 2 = * * * 
State A = * * * 
Country A = * * * 
Country B = * * * 
Country C = * * * 
Country D = * * * 
Country E = * * * 
a = * * * 
b = * * * 
c = * * * 
d = * * * 
e = * * * 
f = * * * 
g = * * * 
h = * * * 
i = * * * 
j = * * * 
k = * * * 
l = * * * 
m = * * * 
n = * * * 
o = * * *
p = * * * 
q = * * * 
r = * * * 
Date A = * * * 
Date B = * * * 
Date C = * * * 
Date D = * * * 
Date E = * * * 

Dear * * * :

This letter responds to your authorized representatives' letter dated February 4, 2020, requesting rulings on certain federal income tax consequences of a series of completed transactions described below (the "Completed Transaction"). The information provided in that request and in subsequent correspondence is summarized below.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party. While this Office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

This letter is issued pursuant to section 6.03 of Rev. Proc. 2020-1, 2020-1 I.R.B. 1, regarding rulings on one or more significant issues under sections 332, 351, 355, 368, or 1036 of the Internal Revenue Code. The rulings contained in this letter only address one or more discrete legal issues involved in the Completed Transaction. This Office expresses no opinion as to the overall tax consequences of the Completed Transaction or as to any issue not specifically addressed by the rulings below.

Facts

Parent is a publicly traded State A corporation and is the common parent of an affiliated group of corporations that files a consolidated return for U.S. federal income tax purposes. Parent owns all the stock of Sub 1 and Sub 4. Sub 1 owns all the stock of Sub 2. Prior to Date A, Sub 2 owned more than e% of the stock of Sub 3, with the remainder of the stock of Sub 3 owned by Sub 4. On Date A, Sub 4's minority interest in Sub 3 was eliminated, such that after Date A, Sub 2 owned all the stock of Sub 3.

Sub 2 also owns all the interests in LLC 6, a limited liability company that is treated as a disregarded entity for U.S. federal income tax purposes (a “disregarded entity”). Sub 3 owns all the interests in LLC 1, a disregarded entity and (as a general partner) b% of FPRS 1, a Country A entity that is treated as a partnership for U.S. federal income tax purposes. Sub 2 and LLC 1 (as limited partners) respectively own the remaining c% and d% of FPRS 1.

FPRS 1 owns all of the interests in LLC 2, a disregarded entity. Together, FPRS 1 owns approximately a a% interest and LLC 2 owns the remainder in FSub 1, a Country A entity that is treated as a corporation for U.S. federal income tax purposes.

FSub 1 owns all of the interests in LLC 3, a disregarded entity. FSub 1 owns approximately a a% interest and LLC 3 owns the remainder in FSub 2, a Country A entity that is treated as a corporation for U.S. federal income tax purposes.

FSub 2 owns all of the interests in LLC 4 and LLC 5, both of which are disregarded entities; an e% interest in FSub 3, a Country A entity that is treated as a corporation for U.S. federal income tax purposes; and an e% interest in FSub 4, a Country A entity that is treated as a corporation for U.S. federal income tax purposes. LLC 4 owns the remaining interests in FSub 3 and FSub 4,

FSub 2, along with FSub1, FSub3, and LLC 3, owns FSub 5, a Country A entity that is treated as a corporation for U.S. federal income tax purposes. FSub 2 owns a f% interest in FSub 5, FSub 1 owns g%, FSub 3 owns h%, and LLC 3 owns the remainder.

FSub 2, along with FSub 3, FSub 4, FSub 5, Sub 3, and LLC 5, owns FPRS 2, a Country A entity that is treated as a partnership for U.S. income tax purposes. FSub 2 owns a i% interest, FSub 3 owns j%, FSub 4 owns k%, FSub5 owns l%, Sub 3 owns m%, and LLC 5 owns the remainder in FPRS 2.

FPRS 2 owns all of the interests in DRE 1, a Country A disregarded entity. DRE 1 owns all of the interests in DRE 2 and DRE 3, each of which is a Country A disregarded entity.

DRE 3 owns all of the interests in DRE 4 and DRE 7, each of which is a Country A disregarded entity. DRE 4 owns all of the interests in DRE 5, a Country B disregarded entity. DRE 5 owns all of the interests in DRE 6, a Country B disregarded entity.

DRE 7 owns all of the interests in DRE 8, a Country A disregarded entity. DRE 8 owns all of the interests in DRE 9, a newly formed Country D disregarded entity.

DRE 1 owns a p%, DRE 3 owns a q%, and DRE 7 owns a r% interest in DRE 10, a newly formed Country C disregarded entity.

Sub 2 owns a n% interest, and LLC 6 owns the remaining o% interest in DRE 11, a Country B disregarded entity.

Parent also operates branches through Sub 1 and Sub 2. Sub 1 operates branches in certain countries including Country C, and Country D. Sub 2 operates branches in certain countries including Country E.

Completed Transaction

Parent undertook the Completed Transaction in order to transfer certain of the assets and liabilities of certain foreign branches of Sub 1 and Sub 2 and DRE 11 (the "Target Assets") to FPRS 2.

The Completed Transaction has been completed as of the date of this ruling, but either the tax return has not yet been filled for the year in which the transaction was completed or the tax return was filed for the year in which the transaction was completed, but this ruling request was filed prior to the filing of the tax return.

The steps of the Completed Transaction are set forth below:

Sub 1 Restructuring

Sub 1 Country C Branch Restructuring

Sub 1 Country D Branch Restructuring

Sub 2 Restructuring

DRE 11 Restructuring

Sub 2 Country E Branch Restructuring

Representations

The taxpayer makes the following representations with respect to the Completed Transaction:

Sub 1 Country C Branch Restructuring

Sub 1 Country D Branch Restructuring

Sub 2 DRE 11 Restructuring

Sub 2 Country E Branch Restructuring

Rulings

Based solely on the information provided and the representations set forth above, the transactions described in Steps (i) through (viii); (ix) through (xiv); (xv) through (xxii); and (xxiii) through (xxvi) are each circular and therefore disregarded for U.S. federal income tax purposes. See Rev. Rul. 77-191, 1977-1 C.B. 94; Rev. Rul. 57-311, 1957-2 C.B. 243; and Rev. Rul. 83-142, 1983-2 C.B. 68. Accordingly:

Sub 1 Country C Branch Restructuring

The transfer of the Target Assets of the Sub 1 Country C Branch pursuant to steps (i) through (viii) will be treated as if:

Sub 1 Country D Branch Restructuring

The transfer of the Target Assets of the Sub 1 Country D Branch pursuant to steps (ix) through (xiv) will be treated as if:

Sub 2 DRE 11 Restructuring

The transfer of a portion of the Target Assets of DRE 11 pursuant to steps (xv) through (xxii) will be treated as if:

Sub 2 Country E Branch Restructuring

The transfer of the Target Assets of the Sub 2 Country E Branch pursuant to steps (xxiii) through (xxvi) will be treated as if:

In each transfer described in Rulings (1) through (10), each transferee will be treated as receiving the property it was deemed to receive.

Caveats

Except as expressly provided herein, no opinion is expressed or implied concerning the Federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter. In particular, no opinion is expressed on whether transfers of the Target Assets or any other Completed Transaction meet the requirements of section 482, or the regulations promulgated thereunder. Also, no opinion is expressed on whether transfers of the Target Assets or any other Completed Transaction will meet any of the requirements of section 721, or the regulations promulgated thereunder, or on the application of any other provision under Subchapter K.

Procedural Statements

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) provides that it may not be used or cited as precedent.

A copy of this ruling letter must be attached to the federal income tax return of each taxpayer involved for the taxable year in which the transactions described herein are completed. Alternatively, a taxpayer filing its return electronically may satisfy this requirement by attaching a statement to its federal income tax return that sets forth the date and control number of this ruling letter.

Under a power of attorney on file with this Office, a copy of this letter is being sent to your authorized representatives.

Sincerely,

Mark J. Weiss
Chief, Branch 2
Office of Associate Chief Counsel (Corporate)

cc:
* * *