Section 1274.—Determi- nation of Issue Price in the Case of Certain Debt Instru- ments…

(Also sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for March 2004.

Rev. Rul. 2004–25

This revenue ruling provides various prescribed rates for federal income tax purposes for March 2004 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term

realize on a sale of their shares, this shareholder purpose is so nearly coextensive with the corporate business purpose as to preclude any distinction between them. Section 1.355–2(b)(2). Therefore, the distribution is treated as carried out for a corporate business purpose. Id .

Situation 2 . Because D expects that the increased value of its stock expected to result from the separation may permit D to effect future acquisitions in a manner that preserves capital with significantly less dilution of the existing shareholders’ interests, providing D with a real and substantial benefit, the distribution is motivated by a real and substantial non-Federal tax purpose germane to the business of D. Section 1.355–2(b)(1) and (2). Further, because this purpose cannot be achieved through another nontaxable transaction that is neither impractical nor unduly expensive, the distribution is carried out for a corporate business purpose. Section 1.355–2(b)(2) and (3). Although the increase in stock value is expected to benefit the shareholders by increasing the amount they would realize on a sale of their shares, this shareholder purpose is so nearly coextensive with the corporate business purpose as to preclude any distinction between them. Section 1.355–2(b)(2). Therefore, the distribution is treated as carried out for a corporate business purpose. Id .

HOLDING

A distribution that is expected to cause the aggregate value of the stock of a distributing corporation and the stock of a controlled corporation to exceed the pre-distribution value of the distributing corporation’s stock satisfies the corporate business purpose requirement of § 355 and § 1.355–2(b) when the increased value is expected to serve a corporate business purpose of either the distributing corporation or the controlled corporation (or both), even if it benefits the shareholders of the distributing corporation.

DRAFTING INFORMATION

The principal author of this revenue ruling is Jeffrey B. Fienberg of the Office of Associate Chief Counsel (Corporate). For further information regarding this rev

enue ruling, contact Mr. Fienberg at (202) 622–7930 (not a toll-free call).