The IRS has concluded in field attorney advice (FAA 20124601F)
that two corporations formed immediately prior to an asset sale
were ignored for U.S. federal income tax purposes.
The field attorney advice addressed a corporation (the taxpayer)
that owned a controlled foreign corporation (CFC) and a subsidiary
(Sub 1). The taxpayer entered into an agreement to sell most of its
property to an unrelated corporation (the buyer), including a
certain property held by CFC (Property A). The taxpayer desired to
receive proceeds from Property A outside the CFC's country, and
the buyer desired to hold such property in a corporation formed in
a different country than CFC's.
Prior to such asset sale, the taxpayer restructured as follows
CFC formed a new corporation (Newco 1) by contributing Property
A in exchange for Newco 1 shares.
The taxpayer's owner (the owner) formed a new corporation
(Newco 2) on behalf of the taxpayer and transferred all of the
stock of Newco 2 to Sub 1 in exchange for consideration.
CFC then transferred the stock of Newco 1 to Newco 2 in
exchange for the retirement of certain intercompany debt owed by
CFC that was transferred to Newco 1 by the taxpayer.
After the restructuring, Sub 1 sold its Newco 2 stock to the
The IRS concluded that CFC sold Property A to the buyer in
substance and disregarded Newco 2 and Newco 1, citing Rev. Rul.
70-140 and Comm'r v. Court Holding Company (324 U.S.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
1 Nov 2016, Webinar, Washington, DC, United States
When the CEO needs to know the tax impact of selling a subsidiary, will your department be ready? When the private equity owner calls to understand the impact of paying a large distribution, is your response time measured in hours or weeks? Tune into our webcast as we help tax professionals prepare for future transactions and make decisions about what is coming.
10 Nov 2016, Webinar, Washington, DC, United States
Join us November 10 for an economic assessment of the election results. Gregory Daco, head of U.S. macroeconomics at Oxford Economics will illustrate the economic and political impact of the new administration based on Oxford Economics’ models and analysis.
16 Nov 2016, Webinar, Washington, DC, United States
This historic presidential election is showcasing two very different visions for the tax code. Plus, top lawmakers in Congress are staking out key positions on tax reform. Join our webcast to learn what the election results will mean for all these tax proposals. We’ll cover the tax platform of the presidential election winner and discuss how the congressional results will shape the tax agenda. Tune in to find out which tax bills and expiring provisions have a chance in the lame duck session and whether 2
The IRS has announced that it will cease the processing of paper returns at three IRS campuses over the coming years. The three affected locations are Covington, Kentucky, Fresno, California, and Austin, Texas.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).