SECTION 4. SAFE HARBORS

The IRS will not assert that a transaction described in section 3 of this revenue procedure lacks substance, and that therefore D lacked control of C immediately before the distribution, within the meaning of § 355(a)(1)(A) of the Code, if the transaction is also described in one of the following safe harbors:

.01 No Action Taken Within 24 Months . No action is taken (including the adoption of any plan or policy), at any time prior to 24 months after the distribution, by C’s board of directors, C’s management, or any of C’s controlling shareholders (as defined in § 1.355–7(h)(3)) that would (if implemented) actually or effectively result in an unwind.

.02 Unanticipated Third Party Trans- action . C engages in a transaction with one or more persons (for example, a merger of C with another corporation) that results in an unwind, regardless of whether the transaction takes place more or less than 24 months after the distribution, provided that—

(1) There is no agreement, understanding, arrangement, or substantial negotiations (within the meaning of § 1.355– 7(h)(1)) or discussions (within the meaning of § 1.355–7(h)(6)) concerning the transaction or a similar transaction (applying the principles of § 1.355– 7(h)(12) and (13), relating to similar acquisitions), at any time during the 24month period ending on the date of the distribution; and

(2) No more than 20 percent of the interest in the other party, in vote or value, is owned by the same persons that own more than 20 percent in vote or value of

Bulletin No. 2016–32 229 August 8, 2016

at (202) 317-7700 (neither a toll-free number).