SECTION 3. REQUEST FOR

COMMENTS

The Service requests comments regarding issues under § 355 that should be addressed in published guidance. Moreover, the Service continues to study language for, and requests comments regarding, § 355(e) representations. Comments should refer to Rev. Proc. 2003–48, and should be submitted to:

Internal Revenue Service P.O. Box 7604 Ben Franklin Station Washington, DC 20044 Attn: CC:PA:RU Room 5226

a distribution must not only satisfy the statutory requirements of § 355, but also must satisfy certain requirements in the regulations, including the business purpose requirement. Section 1.355–2(b)(1) provides that a distribution must be motivated, in whole or substantial part, by one or more corporate business purposes. A corporate business purpose is a real and substantial non-federal tax purpose germane to the business of the distributing corporation, the controlled corporation, or the affiliated group to which the distributing corporation belongs. Section 1.355–2(b)(2). Section 4.04 and Appendix A of Rev. Proc. 96–30 provide guidelines and request certain information and representations regarding whether a distribution satisfies the business purpose requirement.

Section 355(a)(1)(B) provides that a distribution will not qualify for nonrecognition treatment under § 355 if it is used principally as a device for the distribution of the earnings and profits of the distributing corporation, the controlled corporation, or both. Generally, the determination of whether a transaction was used principally as a device will be made from all the facts and circumstances, including, but not limited to, the presence of certain device and nondevice factors. Section 1.355–2(d)(1). Section 4.05 of Rev. Proc. 96–30 requests certain information and representations regarding whether a distribution is used principally as a device.

Section 355(e) provides that the stock of a controlled corporation will not be qualified property under § 355(c)(2) or § 361(c)(2) if the stock is distributed as “part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest in the distributing corporation or any controlled corporation.” See § 355(e)(2)(A)(ii). For this purpose, a 50-percent or greater interest means stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock. See § 355(e)(4)(A) (referring to § 355(d)(4) for the definition of 50-percent or greater interest). Section 1.355–7T generally provides that whether a distribution and an acquisition are part of a plan (or series of related transactions) (hereinafter,

plan) is determined based on all the facts and circumstances. That section provides a nonexclusive list of factors to consider in determining whether a plan exists, as well as a number of safe harbors that may be relied upon in determining whether a plan exists.

Ordinarily, the Service refrains from issuing letter rulings requesting determinations on issues that are primarily factual. See Rev. Proc. 2003–1, 2003–1 I.R.B. 1, section 7.01, and Rev. Proc. 2003–3, sections 2.01 and 4.02(1). Moreover, it generally is the policy of the Service not to issue “comfort rulings” on transactions the treatment of which is clearly and adequately addressed in published guidance. See Rev. Proc. 2003–1, section 5.17, and Rev. Proc. 2003–3, section 4.02(9). Nonetheless, the Service has not strictly applied its policies of not ruling on factual issues and not issuing comfort rulings in the context of letter ruling requests regarding transactions intended to qualify under § 355.

The Service has concluded that it is appropriate to adhere more closely to its general policies in the context of requests for letter rulings under § 355 and that it can better serve taxpayers by dedicating its resources to increasing the amount of published guidance regarding § 355, including the business purpose requirement, and other legal questions. Thus, this revenue procedure provides that the National Office will not determine whether a proposed or completed distribution of the stock of a controlled corporation is being carried out for one or more corporate business purposes, whether the transaction is used principally as a device, or whether the distribution and an acquisition are part of a plan under § 355(e). Rather, these determinations may be made upon an examination of the taxpayer’s return. Hence, sections 4.01, 4.02, and 4.03 of this revenue procedure require taxpayers seeking a ruling under § 355 to submit representations regarding the business purpose and device requirements and whether there is a plan under § 355(e)(2)(A)(ii). The request for a letter ruling, including representations, must be accompanied by a penalties of perjury statement signed and dated by the taxpayer indicating that the submission contains all the relevant facts relating to the request and such facts are true, correct, and complete. See Rev. Proc. 2003–1, sections 8.01(15) and 10.07(1).

2003-29 I.R.B. 87 July 21, 2003

related transactions) may be made upon an examination of the taxpayer’s return.

.04 Rev. Proc. 96–30 is amplified by adding new section 4.08(13) as follows:

(13) Regulatory filings. Provide copies of any proxy statements, information statements, or prospectuses filed or prepared in connection with the distribution or any related transaction.

.05 Rev. Proc. 96–30 is amplified by adding new section 4.08(14) as follows:

(14) Previously Declined Request for Ruling. The Service will not entertain any ruling request regarding a proposed or completed transaction if the Service has previously declined to rule on that transaction (or a similar transaction) because the Service was not satisfied that the distribution met the corporate business purpose requirement, was not a device for the distribution of earnings and profits, or was not part of a plan (or series of related transactions) under § 355(e).

.06 Rev. Proc. 96–30 is amplified by adding new section 4.08(15) as follows:

(15) Request for Supplemental Rul- ing. The Service will decline a request for a supplemental letter ruling, unless the request presents a significant issue (as defined in section 3.01(29) of Rev. Proc. 2003–3). A change in circumstances arising after the transaction ordinarily does not present a significant issue.

.07 Rev. Proc. 2003–3, 2003–1 I.R.B. 113, is modified by deleting section 4.01(30).