Section 355 Spin Off

Since 1986 it remains as one the few transactions that can successfully sidestep the reach of the repeal of the general utilities doctrine.

Section 355 spin off. 2015 43 does not distinguish between pro rata and non pro rata distributions. Section 355 of the internal revenue code irc 355 allows a corporation to make a tax free distribution to its shareholders of stock and securities in one or more controlled subsidiaries. Section 355 and irs ruling policy on spinoffs section 355 provides a limited exception to the general rule that a distribution of appreciated property from a corporation is taxed at both the corporate and shareholder levels.

Despite the numerous and complex requirements associated with a valid section 355 1 spin off a qualifying distribution under section 355 is one of the most valuable tools available to a corporate tax practitioner. Control immediately before the distribution. The three types of corporate divisions are commonly known as spin offs split offs and split ups.

The notice states that rev. For purposes of determining the continued qualification under section 355 b 2 a of the internal revenue code of 1986 of distributions made on or before may 17 2006 as a result of an acquisition disposition or other restructuring after such date such distribution shall be treated as made on the date of such acquisition disposition or. This section does not apply to any distribution that is part of a transaction if either the distributing corporation or controlled corporation is immediately after the transaction a disqualified investment corporation and any person holds immediately after the transaction a 50 or greater interest in any disqualified investment corporation but only if that person did not hold the interest in the corporation immediately before thetransaction.

Seeslide 21 for a more detailed discussion. 2015 43 provides 3 no rule policies under section 355 and related provisions for spin offs involving relatively small atbs or reit ric conversions. Control exists if the parent owns at least 80 percent of a the total combined voting power of all classes of stock entitled to vote and b.

By douglas schaaf erika mayshar. Understanding basics tax free spin off one exception where a corporation is permitted to distribute appreciated property to its shareholders in a tax free manner is via qualified spin off under irc 355. The parent must be under the control of the controlled corporation immediately before the distribution.

In order for a spin off to qualify under section 355 several requirements must be met. These requirements derive from not only the statute itself but also from regulatory and common law principles. Section 355 e 4 d provides that for purposes of section 355 e.