Letter Ruling 9508009 - busting a "B": why and how?

Article Abstract:

The IRS affirmed in Private Letter Ruling 9508009 that tax-free "B" reorganization treatment can be avoided by paying cash to reimburse expense incurred by shareholders in the target corporation. The exchange in a "B" reorganization must be solely stock for stock. The ruling appears to indicate that brief ownership of stock subsequently sold for cash did not defeat tax-free treatment. The acquiring corporation may have wanted the exchange to be taxable to achieve basis step-up. The target may have been a non-US person, may have received additional compensation or may have had a realized loss.

Planning, Tax-free exchanges, Stock transfer

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Two questionable spin-off rulings

Article Abstract:

Two favorable IRS letter rulings regarding spin-offs demonstrate that taxpayers should not assume that the IRS will not issue perverse rulings. In Letter Ruling 9537027, the IRS accepted the spin-off despite the fact that one party acquired an interest through a merger in anticipation of the spin-off. In Letter Ruling 9540050, the IRS accepted a business purpose that was manufactured through the taxpayer's refusal to meet standard requirements for a business loan.

Analysis, Tax administration and procedure, Tax administration

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Letter Ruling 9719036 - ruling letters rush in where opinion letters fear to tread

Article Abstract:

IRS Letter Ruling 9719036 exemplifies a taxpayer-favorable ruling which runs counter to established tax law. Using grandparent stock as consideration in a tax-free reorganization appears acceptable to the IRS under the ruling. Proposed regulations are likely to take this same position, given that the letter ruling permits use of grandparent stock in this de facto manner.

Stocks

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