Revenue Ruling 2017-09: New IRC 355 North-South Spinoff Transaction Guidance and Resumption of Private Letter Rulings

On May 3, 2017, the IRS issued Rev. Rul. 2017-09, offering guidance in the federal tax treatment of certain “north-south” transactions in connection with tax-free spin-offs. This ruling reversed the IRS’s previously announced course, specifying that the IRS would resume issuing private letter rulings on whether these “north-south” transactions would be integrated or respected as separate for federal income tax purposes.

A north-south transaction involves both the contribution of assets to and the distribution of assets from a corporation pursuant to the same overall plan. The transactions are often structured with the intent of non-recognition treatment as a corporate spinoff under IRC 355 or with the intent of a nontaxable intercompany distribution under IRC 301.

However, the IRS has long reserved the right to integrate the contribution and distribution. Complicating matters for tax counsel, since 2013 the IRS has not issued private letter rulings for any north-south spinoff transaction.

The recent revenue ruling presents fact-pattern examples of when a north-south transaction will, and will not, qualify for tax-deferral treatment, and announces that the IRS will resume issuing PLRs, since these spinoff transactions are no longer on their list of issues under study. The guidance, however, is limited and does not cover all types of contemplated spinoffs. Failure to comply with these complex rules could result in a significant tax cost.

Listen as our experienced panel discusses the impact of the new IRS guidance on north-south transaction structures, including strategies on when to pursue private letter rulings in advance of contemplated transactions.

1. Structures of north-south transactions in connection with tax-free spin-offs
2. Prior IRS guidance
3. Rev. Rul. 2017-09
   1. What type of exchange will be respected as separate transactions qualifying for non-recognition under Section 355?
   2. What type of exchange does Rev. Rul. 2017-09 specifically mention as likely to be integrated?
4. Identifying circumstances where a private letter ruling may be appropriate prior to structuring a north-south transaction

The panel will discuss these and other important questions:

• What types of common north-south transactions in connection with tax-free spin-offs will be respected as separate? Which ones won’t?
• What types of circumstances should prompt tax counsel to seek a private letter ruling prior to a contemplated north-south transaction?

Learning Objectives

After completing this course, you will be able to:

• Recognize transaction structures that Rev. Rul. 2017-09 states will be respected as separate steps
• Discern circumstances where the IRS will seek to integrate the two parts of a north-south transaction
• Identify scenarios where counsel should seek a private letter ruling prior to implementing a north-south transaction

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or professional firm experience at mid-level within the organization, preparing complex tax structures for businesses; supervisory authority over other professionals. Knowledge and understanding of business structures, purchase price allocation, tax indemnification provisions. Familiarity with basic concepts related to nonrecognition rules for spinoff transactions.

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