C12-Chp-01-7-Split-off-IRS Let-Rul-200339007

C12-Chp-01-7-Split-off-IRS Let-Rul-200339007 -...

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6d435982c35754f62322a948a31ab1180afce279.doc. Page 1 of 2 IRS Letter Ruling 200339007, June 10, 2003-Split-off Note: This letter ruling uses the term spin-off, but it actually describes a split-off. Instructor has edited the letter ruling to make it easier to read. [ Code Sec. 355 ] Old Corporation is referred to as OldCorp OldCorp is a C corporation that uses the cash method of accounting and a calendar year. Fifty percent of the stock of OldCorp is owned by members of Family A : Albert and Betty who are married and their son Carl. Fifty percent of the stock of OldCorp is held by members of Family B . Controversy between the Families Family A desires for OldCorp to continue business operations substantially unchanged except for manage- ment of the business gradually being transferred to their son, Carl. Members of Family B believe Carl is too young to manage OldCorp's operations and want to hire a pro- fessional manager. Family B wants OldCorp to make adjustments in its business so that, while continuing in Business A, it expands into more profitable related areas. As a result of this philosophical difference between the equal shareholder groups, it is becoming increasingly difficult to maintain a consistent business strategy for OldCorp. The owners wish to divide OldCorp between Family A and Family B , in order to have two companies, each of which will have its own consistent business strategy and, thus, the potential to function more effectively. NewCorp will be Formed NewCorp, will be a new corporation formed under the laws of North Carolina. All the outstanding stock in NewCorp will be received by OldCorp. Detailed Steps in the Plan (I) OldCorp will form NewCorp which will have outstanding solely voting common stock. (II) OldCorp will transfer to NewCorp one half (in value) of both its real property and its other business assets. NewCorp will not assume any liabilities in the transaction and none of the assets received by NewCorp will be subject to any liability. (III) OldCorp will distribute all the NewCorp stock to the Family A in exchange for of all their stock in OldCorp. Each shareholder in Family A will receive one share of NewCorp stock in exchange for each share of stock in OldCorp. (Following this step, the Family B group will own all the outstanding stock in
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C12-Chp-01-7-Split-off-IRS Let-Rul-200339007 -...

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