LTR 201319009 seems to be an odd ruling, because the taxpayer sought a ruling that it had to capitalize certain costs of an acquisition through use of a double dummy structure. However, the taxpayer actually was limiting its capitalization by obtaining a ruling that a section 351 exchange with boot was a “covered transaction” for purposes of Reg. Section 1.263(a)-5(b).
Facts. Company 1 wanted to acquire Company 2. Company 1 created Parent. Parent created two mergersubs. One mergersub merged into Company 1 for Parent stock. The other mergersub merged into Company 2 for Parent stock and cash. The amount of cash is not stated but we know it had to be more than 20 percent of the consideration because the merger did not qualify under section 368(a)(2)(E).
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LTR 201213011 rules that a domestic corporation can generate a section 301 distribution to its shareholder(s), possibly for the purpose of creating capital gain, possibly to allow use of an expiring capital loss of the shareholder. Sec. 1212(a). The ruling is unusual both for its brevity and for dealing with section 305, which does not attract many letter rulings.
Facts. Taxpayer had outstanding common stock and at least two and possibly three classes of preferred stock: (1) cumulative preferred stock with dividends in arrears, (2) preferred stock convertible into common, and (3) other preferred stock. Taxpayer capitalized the dividends in arrears into some form of stock, which Reg. secs. 1.368-2(e)(5) and 1.305-7(c)(1)(ii) treat under section 305(c) as a deemed distribution to which sections 305(b)(4) and 301 apply. Then taxpayer issued common in exchange for some of the convertible preferred and also for other preferred that evidently was not convertible. Then taxpayer issued warrants to buy more common stock to all of its common shareholders as of the record date.
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The SEC is sending inquiry letters that include questions about repatriation of foreign earnings to a growing number of filers, including recently Esterline Technologies Corporation, Columbus McKinnon Corporation, Manpower Inc., MercadoLibre, Inc., Standex International Corporation, Pulse Electronics Corporation, ComCam International, Inc., Google Inc., GlaxoSmithKline plc and The Gap, Inc. These inquiries appear to arise in connection with routine review of annual reports or other regular filings by the companies.
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