US revenue rulings conclude that transactions involving foreign subs qualify under section 351 and as D reorgs

The US IRS on May 6 issued two revenue rulings that conclude that transactions amount to section 351 transactions followed by D reorganizations.

In Rev. Rul. 2015-09, the Service revoked Rev. Rul. 78-130, concluding that a transaction in which (1) a domestic corporation transfers all of the stock of its foreign operating subsidiary to its foreign holding company subsidiary in exchange for additional stock, (2) the foreign operating subsidiary and three foreign subsidiaries of the foreign holding company transfer substantially all of their assets to a newly-formed foreign subsidiary of the foreign holding company in exchange for stock of the new subsidiary, and (3) the subsidiaries that transfer their assets are liquidated, is properly treated as a transfer of the foreign operating subsidiary’s stock in an exchange governed by section 351 followed by reorganizations under section 368(a)(1)(D).

In Rev. Rul. 2015-10 the Service ruled that a transaction in which (1) a parent corporation transfers all of the interests in its limited liability company that is taxable as a corporation to the first subsidiary in exchange for additional stock, (2) the first subsidiary transfers all of the interests in the limited liability company to the second subsidiary in exchange for additional stock, (3) the second subsidiary transfers all of the interests in the limited liability company to the third subsidiary in exchange for additional stock, and (4) the limited liability company elects to be disregarded as an entity separate from its owner for federal income tax purposes effective after it is owned by the third subsidiary, is properly treated as two transfers of stock in exchanges governed by section 351 followed by a reorganization under section 368(a)(1)(D).

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