Recent developments in Sec. 355 spinoffs

Editor: Alexander J. Brosseau, CPA

This item discusses certain considerations with respect to spinoff transactions by public companies that are intended to qualify as tax-free under Sec. 355. It focuses on (1) recent developments for obtaining a private letter ruling from the IRS in connection with a spinoff transaction; (2) tax-efficient deleveraging transactions that can be undertaken as part of a spinoff transaction; and (3) the applicability of the new corporate alternative minimum tax (corporate AMT) under Sec. 55 (and Secs. 56A and 59) and the new Sec. 4501 stock repurchase excise tax, both of which were recently enacted as part of the Inflation Reduction Act of 2022, P.L. 117-169.

Spinoff transactions generally

Spinoff transactions occur for a variety of reasons, including to allow different businesses to pursue their own capital allocation and growth strategies and to increase aggregate equity value by creating a more “pure-play” stock, which can enhance its use for acquisitions and equity compensation for employees.

A spinoff transaction is a significant event for a public company. It results in a second, independent public company with a new capital structure, board of directors, and management team. Preparation for the transaction may require significant internal restructurings depending on where the businesses are located within the organizational structure. These internal restructuring transactions have their own tax consequences (e.g., an internal spinoff intended to qualify as tax-free under Sec. 355) and may involve non-U.S. jurisdictions and tax considerations. Further, as discussed below, tax-efficient deleveraging transactions generally can be undertaken as part of a spinoff transaction.

In a Sec. 355 transaction, the distributing corporation generally either (1) distributes all of the stock of a controlled corporation pro rata to its shareholders (i.e., a spinoff), or (2) redeems its stock from some shareholders in exchange for all of the stock of a controlled corporation (i.e., a split-off). Under Sec. 355, a spinoff transaction can qualify as tax-free to both the distributing corporation and its shareholders. If it does not qualify as tax-free, the distributing corporation will be taxed on any built-in gain in the controlled corporation stock, and the distributing corporation shareholders will have a Sec. 301 distribution equal to the fair market value of the controlled corporation stock, which will be taxable as a dividend to the extent of the earnings and profits of the distributing corporation.

To qualify for tax-free treatment under Sec. 355, a spinoff transaction must satisfy several stringent requirements that require significant diligence and analysis. They include:

• The distributing corporation and the controlled corporation must each have a trade or business that generally has been owned and operated for at least five years (the active-tradeor- business requirement);
• One or more corporate business purposes must substantially motivate the spinoff and be intended to resolve significant corporate-level issues that adversely affect the businesses (the business-purpose requirement); and
• The spinoff cannot be used principally as a device for the distribution of the earnings and profits of the distributing corporation or the controlled corporation or both, including through a sale of stock of the distributing or controlled corporation (the non-device requirement).

The foregoing requirements generally are intended to limit Sec. 355 treatment to transactions that relate to corporate restructurings required by business exigencies where there is not a material change in ultimate ownership of the businesses (see Gregory v. Helvering, 293 U.S. 465 (1935) (tax-free treatment not available where a transitory controlled corporation was used to distribute a minority stock interest to an individual shareholder who then sold the minority stock interest and (1) reported the distribution was tax-free and (2) reported capital gain in connection with the sale of the interest)). Further, anti-change-of-control rules under Secs. 355(d) and 355(e) can cause a spinoff transaction that otherwise qualifies under Sec. 355 to be taxable to the distributing corporation (but not its shareholders), as if the distributing corporation had sold the controlled corporation stock for cash.

Fast-track process and expanded scope for private letter rulings

One key tax workstream for a spinoff transaction involves the manner in which Sec. 355 qualification is confirmed. In general, there are two approaches. The first approach involves obtaining a private letter ruling from the IRS, together with a so-called gap opinion from a tax adviser. The gap opinion generally addresses the Sec. 355 requirements for which the Service will not issue a ruling. In recent years, the Service would not rule on the businesspurpose requirement, the non-device requirement, and Sec. 355(e) (see, e.g., Rev. Proc. 2023-3, §3.01(63)). These requirements generally entail a factintensive analysis that the IRS viewed as more appropriate for review during an audit. The Service, however, was willing to rule on certain legal issues with respect to such requirements (e.g., counting mechanics for Sec. 355(e)) (id.). Pursuant to Rev. Proc. 2024-3, released on Jan. 2, 2024, the Service will now rule on the non-device requirement and Sec. 355(e) — generally, a welcome addition — while the business-purpose requirement remains a no-rule area (other than for certain legal issues).

The second approach involves an opinion from a tax adviser that addresses all Sec. 355 requirements. In addition, instead of requesting a ruling with respect to the spinoff transaction as a whole (other than the no-rule requirements described above), a taxpayer could request a “significant issue ruling” with respect to one or more “significant issues” relating to a Sec. 355 requirement (e.g., whether a trade or business constitutes an “expansion” of a five-year active trade or business for purposes of the active-trade-or-business requirement) and obtain an opinion from a tax adviser on the remaining issues (taking into account the significant-issue ruling).

From a tax perspective, the first approach generally has been viewed as preferable, given that the IRS has weighed in on the overall spinoff transaction. In certain instances, however, the deciding factor is the timeline for the spinoff transaction. The Service generally does not provide a specific timeline or end date for the private letter ruling process. A general rule of thumb for obtaining a letter ruling is six months after submitting the request; however, the process could take much longer, depending on the complexity of the transaction and rulings requested, as well as whether IRS Associate Chief Counsel branches other than Corporate are involved. Thus, although a spinoff transaction generally may take up to a year to complete, a company may not want a private letter ruling to potentially dictate (i.e., delay) the timeline.

In January 2022, the IRS released Rev. Proc. 2022-10, which established an 18-month pilot program of “fasttrack” processing for private ruling requests under the jurisdiction of the Corporate branch, including spinoff transactions. In July 2023, Rev. Proc. 2023-26 replaced Rev. Proc. 2022-10 and made the fast-track process permanent. Rev. Proc. 2017-52 sets forth the information and representations that must be included in a Sec. 355 ruling request (see also Rev. Proc. 96-30).

Under Rev. Proc. 2023-26, (1) the IRS generally will issue a private letter ruling within 12 weeks of the request’s being accepted into the fast-track process; (2) the taxpayer generally does not need to demonstrate a business need for fast-track processing (unless requesting a ruling in less than 12 weeks); (3) the taxpayer must respond within seven business days to any requests by the Service for additional information; and (4) the request must include a draft private letter ruling. If a ruling is requested for an issue under the jurisdiction of an IRS branch other than Corporate, that branch must agree to the fast-track process. Also, if a ruling request involves an issue under an Associate Chief Counsel branch other than Corporate but no ruling is requested, the other branch must not object to the fast-track process.

Making the fast-track process permanent was a welcome development for companies and tax advisers. It allows taxpayers to seek more certainty on Sec. 355 qualification in a shorter, more certain timeline.

While a private letter ruling can be expected within 12 weeks of fast-track process acceptance, companies should be aware that getting to that acceptance point still takes significant time. First, the transaction steps and any related restructurings and transactions (e.g., deleveraging transactions and ongoing commercial relationships) must be determined. Second, the scope of the ruling request (e.g., whether to include any internal spinoff transactions) must be determined and the ruling request prepared, which involves substantial information collecting and drafting. In addition, the taxpayer must have a conference with the IRS prior to submitting the ruling request, in which the taxpayer and its advisers provide a brief overview of the transaction and highlight any complex or unique issues.

Further, after the ruling request is submitted, it generally takes up to two weeks for the Service to inform the taxpayer that the ruling request has been accepted for fast-track processing. Finally, note that supplemental submissions to the Service, including transaction step changes, can cause delays and may result in the ruling request’s being removed from the fast-track process.

The broadening of the Service’s Sec. 355 ruling approach set forth in Rev. Proc. 2024-3 should allow taxpayers to obtain additional certainty. In addition, the fast-track process should still be available for these expanded-scope private letter rulings.

Deleveraging in connection with a spinoff transaction

As mentioned above, a distributing corporation may be able to undertake tax-efficient deleveraging transactions in connection with a spinoff transaction. These transactions generally do not change the value of the shareholders’ overall investment but allow the distributing corporation to shift (or economically shift) third-party debt to the controlled corporation, which provides flexibility for capital allocation and optimized capital structures. In general, a spinoff transaction may involve one or more of four types of tax-efficient deleveraging transactions: (1) debt assumption, (2) cash distribution, (3) debt-for-debt exchange, and (4) debt-for-equity exchange. Taxpayers undertaking them, especially a debt-fordebt or debt-for-equity exchange, typically seek a private letter ruling.

Debt assumption: Pursuant to a debt assumption, the controlled corporation would legally assume existing third-party debt of the distributing corporation. Where the spinoff transaction includes a Sec. 368(a)(1)(D) reorganization (e.g., transfer of a business to a new controlled corporation), Sec. 361(a) provides that no gain or loss is recognized by the distributing corporation if it receives solely stock or securities of the controlled corporation. If the distributing corporation also receives cash (or other property — i.e., boot) from the controlled corporation, then, under Sec. 361(b)(1), the distributing corporation must distribute the cash to its shareholders (or, as discussed below, its creditors) as part of the spinoff transaction to avoid recognizing gain with respect to the transfer of assets to the controlled corporation.

Under Sec. 357(a), the assumption of distributing corporation debt by the controlled corporation generally is not treated as cash received by the distributing corporation for purposes of Sec. 361. Thus, in the first instance, distributing corporation debt assumed by the controlled corporation should not cause the distributing corporation to recognize gain with respect to the business transferred to the controlled corporation. Sec. 357(a), however, is subject to two exceptions: (1) Sec. 357(b), which applies where liabilities are assumed for a tax-avoidance purpose, and (2) Sec. 357(c), which applies where the liabilities assumed exceed the tax basis of the property transferred (generally disregarding, under Sec. 357(c)(3), liabilities that would result in a deduction or the creation of tax basis when subsequently paid).

In general, Sec. 357(b) applies in two cases: (1) the principal purpose for the liability assumption was to avoid U.S. federal income tax on the exchange; or (2) where there is no tax-avoidance purpose, but there was no business purpose for the liability assumption. In Rev. Rul. 79-258, the IRS concluded that Sec. 357(b) did not apply where (1) a portion of the distributing corporation debt related to assets transferred to the controlled corporation but the creditor would not consent to an assumption of such debt by the controlled corporation, and (2) the distributing corporation incurred new bank debt and retained the proceeds and the controlled corporation assumed the new bank debt. In this case, the new bank debt was a proxy for the portion of the existing debt that related to the assets transferred to the controlled corporation (but could not be assumed).

In private letter rulings for spinoff transactions, the IRS has effectively ruled that Sec. 357(b) did not apply where the liabilities assumed did not relate to the business transferred to the controlled corporation but (1) equalized values of the distributing and controlled corporations (e.g., Letter Ruling 200234061 (May 22, 2002)) or (2) established an appropriate liquidity and capital structure for the distributing and controlled corporations (e.g., Letter Ruling 201703012 (Sept. 20, 2016)).

Cash distribution: Debt assumption, however, may not be available because the covenants in the relevant debt agreements may prohibit an assumption by the controlled corporation. In such case, the distributing corporation may alternatively deleverage by (1) the controlled corporation incurring debt and distributing the proceeds to the distributing corporation, and (2) the distributing corporation using the cash received to repay historic distributing corporation debt (or debt that refinanced such debt). As mentioned above, under Sec. 361(b)(1), if the distributing corporation receives cash from the controlled corporation, the distributing corporation must distribute the cash to its shareholders as part of the spinoff transaction to avoid recognizing gain with respect to the transfer of assets to the controlled corporation. For this purpose, Sec. 361(b)(3) provides that a transfer by the distributing corporation to its creditors will be treated as a distribution to its shareholders. However, under Sec. 361(b)(3), the distributing corporation will recognize gain to the extent the amount of cash received and transferred to creditors exceeds the aggregate tax basis of the assets transferred to the controlled corporation (net of the liabilities assumed by the controlled corporation under Sec. 357(c)).

A borrowing and distribution of cash by the controlled corporation (and the use of such cash by the distributing corporation to repay its debt) is a relatively straightforward way to deleverage the distributing corporation. However, such aggregate net tax basis may be low (e.g., a historic business with depreciated assets and/or self-created intangibles, including goodwill) as a general matter or relative to the amount of desired deleveraging. In such case, if the distributing corporation seeks to further deleverage in a tax-efficient manner, two additional transactions generally are available: a debt-for-debt exchange and a debt-forequity exchange.

Debt-for-debt exchange: Pursuant to a debt-for-debt exchange, the controlled corporation would issue debt instruments to the distributing corporation, which would be used to repay historic distributing corporation debt (or debt that refinanced such debt). The controlled corporation debt instruments must be treated as “securities” for purposes of Sec. 361, discussed below. In particular, in contrast to cash and other property, controlled corporation securities are not treated as boot for purposes of Secs. 361(a) and (b). As a result, the tax-basis limitation in Sec. 361(b)(3) discussed above that applies to a cash deleveraging transaction does not apply to controlled corporation securities. (Prior legislative proposals would have created a tax-basis limitation for controlled corporation securities, most recently in the Build Back Better Act (H.R. 5376) (new proposed Sec. 361(d).)

In addition, under Sec. 361(c)(1), except as provided in Sec. 361(c)(2), the distributing corporation will not recognize any gain or loss on the distribution to its shareholders of property as part of the spinoff transaction. Under Sec. 361(c)(2), the distributing corporation recognizes gain with respect to distributed property that is not “qualified property.” Sec. 361(c)(2)(B) provides that qualified property includes any stock or obligation of the controlled corporation received as part of the Sec. 368(a)(1) (D) reorganization.

Finally, Sec. 361(c)(3) provides that transfers of qualified property by the distributing corporation to its creditors in connection with the reorganization will be treated as distributions to its shareholders (and, thus, generally treated as tax-free for the distributing corporation under Sec. 361(c)(1)). An obligation for purposes of Sec. 361(c)(2) should include controlled corporation debt, regardless of whether that debt constitutes securities; however, as mentioned above, securities treatment is required to prevent the Sec. 361(b)(3) tax-basis limitation from applying. Note that Sec. 361(c) is not relevant to cash deleveraging transactions because there is no gain (or loss) in cash. In sum, a debt-for-debt exchange as described above generally can accomplish a tax-free deleveraging regardless of the amount of deleveraging and the tax basis of the assets transferred to the controlled corporation (although there will be nontax considerations for the total amount of controlled corporation debt).

As mentioned above, the key to a debt-for-debt exchange is that the controlled corporation debt constitutes securities for purposes of Sec. 361. Neither the Code nor Treasury regulations define the term “securities” for purposes of Sec. 361. Courts, however, have provided that the determination is based on the relevant facts and circumstances and have developed guiding factors (see, e.g., Camp Wolters Enterprises, Inc., 22 T.C. 737 (1954), acq., 1954-2 C.B. 3, aff ’d, 230 F.2d 555 (5th Cir. 1956), cert. denied, 352 U.S. 826 (1956)). The courts have attempted to distinguish between debt instruments that (1) can be viewed more as cash equivalents, which generally should not be securities, or (2) represent more of an investment in the business enterprise of the debtor corporation, which generally should be securities.

One key factor identified by the courts is the term of the debt instrument, which in many cases may serve as a proxy for the cash-equivalent versus investment determination. Specifically, the longer the term of the debt instrument, the longer the creditor is exposed to risk of the debtor corporation. In general, a debt instrument having a term of 10 years or more has been treated as a security, while a debt instrument having a term of less than five years has not (see, e.g., Baker Commodities, Inc., 48 T.C. 374 (1967) (15-year notes were securities); Rev. Rul. 2004-78 (“Under case law, an instrument with a term of less than five years generally is not a security.”)). Very generally, securities treatment likely is available for a debt instrument that has a seven- to eight-year maturity, is not puttable by the holder, and is not callable by the debtor corporation for at least five years (and otherwise has customary terms and conditions).

Debt-for-equity exchange: A debt-for-equity exchange allows a distributing corporation to deleverage without the controlled corporation’s having to incur debt. The distributing corporation would use controlled corporation stock to repay historic distributing corporation debt (or debt that refinanced such debt). If the spinoff transaction includes a Sec. 368(a)(1)(D) reorganization (e.g., transfer of assets to a new controlled corporation), the distributing corporation cannot use more than 20% of the controlled corporation stock in a debt-for-equity exchange. In particular, under Sec. 368(a)(1)(D), the shareholders of the distributing corporation must have Sec. 368(c) control of the controlled corporation immediately after the spinoff (i.e., at least 80% of the controlled corporation stock if there is one class of stock). Similar to a debtfor- debt exchange under Sec. 361, the transfer of the controlled corporation stock by the distributing corporation to its creditors is tax-free, and there is no tax-basis limitation.

Investment bank facilitation: It may be difficult for the distributing corporation to effect a debt-for-debt or debt-for-equity exchange with the existing holders of historic distributing corporation debt (or debt that refinanced such debt). For example, if the distributing corporation has bonds outstanding, it would need to undertake an exchange offer to repay the bonds with controlled corporation debt securities or stock, which may or may not be successful. Given this difficulty, investment banks that are otherwise advising distributing corporations on spinoff transactions have helped facilitate debt-for-debt and debt-for-equity exchanges.

Pursuant to this facilitation, the distributing corporation may, for example, issue short-term debt to an investment bank and use the proceeds to repay historic distributing corporation debt (or debt that refinanced such debt). In addition, the distributing corporation and the investment bank would subsequently enter into an exchange agreement where the distributing corporation would use the controlled corporation debt securities and/or stock to repay the short-term debt owed to the investment bank. Following the repayment of the short-term debt, the investment bank generally would sell the controlled corporation debt securities and/or stock to unrelated investors.

Ruling guidelines: Rev. Proc. 2018-53 provides guidelines under which the IRS will rule that no gain or loss is recognized by a distributing corporation with respect to the deleveraging transactions discussed above. Rev. Proc. 2018-53 prescribes representations that must be submitted as part of a private letter ruling request. In certain instances, and subject to Service review, the representations can be modified based on the proposed deleveraging transactions. In general, the representations relate to the Service’s analysis of whether (1) the distributing corporation debt to be repaid is historic debt (i.e., the distributing corporation is not itself leveraging up in connection with the spinoff) and (2) any investment bank that is facilitating a debt-for-debt and/or debt-for-equity exchange is acting as a principal for its own account (and not as an agent for the distributing corporation, whereby the distributing corporation could be treated as selling the controlled corporation debt securities and/or stock for cash and correspondingly recognizing gain and then repaying the distributing corporation debt with such cash). In addition, Rev. Proc. 2018-53 requires a representation that the holder of the distributing corporation debt that will be satisfied is not related to the distributing corporation (i.e., it is not intercompany debt).

In private letter rulings, the IRS has permitted increased flexibility regarding deleveraging transactions and the requirements under Rev. Proc. 2018-53. In this regard, Rev. Proc. 2018-53 generally requires the deleveraging transactions to occur within 30 days of the spinoff transaction or, if there are substantial business reasons for a delay, within 180 days. Rev. Proc. 2018-53 also contemplates deleveraging transactions occurring more than 180 days after the spinoff transaction where the distributing corporation can establish that the deleveraging transactions are part of the spinoff transaction. This timing rule generally was intended to ensure that favorable tax treatment under Sec. 361 is available only for deleveraging transactions that are defined under and undertaken in connection with the spinoff transaction (as opposed to the distributing corporation’s subsequently determining the manner in which cash, controlled corporation debt securities, and/or stock is disposed).

The IRS has ruled that the distributing corporation would have a 12-month period following the spinoff transaction to undertake a debt-for-equity exchange or otherwise distribute the remaining controlled corporation stock to its shareholders in a follow-on spinoff or split-off (in each case, tax-free under Sec. 355), with any remaining controlled corporation stock to be sold (generally, a taxable transaction) within five years of the spinoff (see, e.g., Letter Ruling 202151001 (Sept. 24, 2021), as supplemented by Letter Ruling 202231004 (May 12, 2022)).

Retention of stock: Finally, instead of a debt-for-equity exchange, the distributing corporation could potentially retain controlled corporation stock and subsequently dispose of it (generally, a taxable transaction). In general, under Sec. 355(a)(1)(D), the distributing corporation must distribute (1) all of the controlled corporation stock or (2) an amount of controlled corporation stock constituting Sec. 368(c) control and establish to the IRS’s satisfaction that the retention is not pursuant to a tax-avoidance plan. Under prior private letter ruling guidelines (see Rev. Proc. 96-30, Appendix B), retention of controlled corporation stock requires that (1) there be a separate business purpose for the retention (see, e.g., Rev. Rul. 75-321 (retention of controlled corporation stock to serve as collateral for distributing corporation debt)); (2) there generally be no overlap between officers and directors of the distributing and controlled corporations; (3) the distributing corporation dispose of the retained controlled corporation stock within five years after the spinoff transaction; and (4) the distributing corporation votes the retained controlled corporation stock in proportion to votes made by other controlled corporation shareholders.

It appears that Congress and the IRS are concerned that a retention could allow the distributing corporation to exercise control over the controlled corporation following the spinoff, which could be inconsistent with the general separation required under Sec. 355. Given the language of Sec. 355(a)(1)(D) (i.e., to establish to the IRS’s satisfaction that the retention does not involve tax avoidance), it may be prudent to seek a private letter ruling for any retention of controlled corporation stock.

Corporate AMT

Under the corporate AMT, corporations must first determine whether they are subject to the tax (an “applicable corporation”) and, if so, must then determine whether they owe a corporate AMT liability. The testing and liability rules are based on financial statement income and loss as adjusted pursuant to Sec. 56A (adjusted financial statement income, or AFSI) and taking into account the rules of Sec. 59. The testing rule for applicable corporation status relates to having average AFSI over a three-year period that exceeds certain thresholds.

Although tax-free for U.S. federal income tax purposes, a Sec. 355 split-off transaction (i.e., distribution of controlled corporation stock in exchange for distributing corporation stock) may result in financial statement gain or loss (and thus AFSI) for the distributing corporation, together with a basis adjustment to the controlled corporation assets. A Sec. 355 spinoff transaction (i.e., a pro rata distribution) does not result in financial statement gain or loss. In addition, the deleveraging transactions described above could result in financial statement gain or loss (and thus AFSI) for the distributing corporation.

Notice 2023-7, which contains interim guidance on the corporate AMT, attempts to create parity between it and regular U.S. federal income tax rules for spinoff transactions, including deleveraging transactions. In particular, under Notice 2023-7, financial statement gain or loss resulting from a Sec. 355 split-off transaction is not taken into account by the distributing corporation in computing AFSI. Correspondingly, there is no adjustment to the basis of the assets of the controlled corporation for corporate AMT purposes. Similarly, any deleveraging transactions that qualify as tax-free to the distributing corporation for U.S. federal income tax purposes do not result in AFSI.

In addition, Notice 2023-7 contains rules relating to the applicable corporation status of a controlled corporation. Under Sec. 59(k), if a corporation becomes an applicable corporation (and thus subject to corporate AMT), it generally will always be an applicable corporation. Notice 2023-7 provides that any applicable corporation status of the controlled corporation will terminate upon the spinoff transaction. However, AFSI of the distributing corporation must be allocated to the controlled corporation for each year of the three-year testing period for applicable corporation status (i.e., the three-year period preceding the year of the spinoff transaction), and the controlled corporation must use that AFSI to determine its applicable corporation status. The AFSI of the distributing corporation for the threeyear testing period is not reduced by the allocation to the controlled corporation. Notice 2023-7 provides that any reasonable allocation method can be used, but proposed Treasury regulations will provide for a required allocation method. Taxpayers should watch for these regulations and other guidance.

Stock repurchase excise tax

New Sec. 4501 imposes an excise tax on the repurchase of stock by certain publicly traded corporations. In general, under Sec. 4501(c), a repurchase of stock includes a redemption under Sec. 317(b) (i.e., an acquisition by a corporation of its own stock for consideration other than its own stock) and any “economically similar” transaction. Notice 2023-2, which contains interim guidance on Sec. 4501, includes an exhaustive list of transactions that are economically similar to a Sec. 317(b) redemption (and thus a repurchase) and a nonexhaustive list of transactions that are not economically similar (and thus not a repurchase). In this regard, Notice 2023-2 provides that Sec. 355 spinoffs (i.e., pro rata distributions) are not treated as economically similar transactions and thus are not repurchases. In contrast, Notice 2023-2 provides that Sec. 355 split-offs (i.e., exchanges of distributing corporation stock for controlled corporation stock) are treated as economically similar transactions and thus are repurchases. However, Notice 2023-2 also provides for a qualifying property exception pursuant to which certain property used by a corporation to repurchase stock reduces the amount of repurchases subject to tax under Sec. 4501. This qualifying property exception includes a repurchase by a distributing corporation as part of a Sec. 355 split-off where controlled corporation stock is used (i.e., property that can be received tax-free under Sec. 355). Thus, a Sec. 355 split-off transaction generally should not be subject to tax under Sec. 4501.

Editor Notes

Alexander J. Brosseau, CPA, is a senior manager in the Tax Policy Group of Deloitte Tax LLP’s Washington National Tax office. For additional information about these items, contact Brosseau at abrosseau@deloitte.com. Unless otherwise noted, contributors are associated with Deloitte Tax LLP.

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