Rev. Rul. 56-286

Advice has been requested as to the method of complying with section 333 of the Internal Revenue Code of 1954 with respect to certain investment stocks transferred by a personal holding company upon complete liquidation to its qualified electing shareholders. Section 333 of the Code requires, among other things, that `the transfer of all the property under the liquidation' shall occur within some one calendar month.

The corporation's assets consist of cash and common stocks of twenty-four different corporations. By reason of the number of stocks and transfer agents involved, it is possible that the actual issuance of new certificates by one or more of the transfer agents or the actual physical delivery of new certificates to the transferee shareholders may not take place until after the expiration of the calendar month selected for the distribution. A pro rata distribution among the corporation's shareholders involves fractional shares which may not be procurable. Furthermore, there will be cash and stock dividends payable after the end of the calendar month to shareholders of a record date prior to the issuance by the transfer agent of new certificates to the transferee shareholders.

In view of the problems involved, the Internal Revenue Service holds as follows:

(1) For the purposes of section 333 of the Internal Revenue Code of 1954, the transfer to the shareholders of the corporation of their respective interests in stock owned by the corporation will occur on the date of mailing the original certificates to the transfer agent thereof, accompanied by assignments thereof and instructions directing the issuance of new certificates in the name of the transferee shareholders.

(2) The provisions of section 333 of the Code will be met if, during the calendar month of liquidation, certificates for the aggregate of any fractional shares involved are issued to a designated nominee and irrevocable instructions are given by the corporation to the nominee (a) to sell the certificates for the account of the corporation's shareholders and (b) to distribute the proceeds among the shareholders in accordance with their respective interests in such fractional shares.

(3) If any corporation, in which the instant corporation owns stock declares a cash or stock dividend payable or issuable after the end of the calendar month selected for distribution to shareholders of record determined as of a record date, prior to the date of issuance by the transfer agent of new certificates in the name of the transferee shareholders, and within such calendar month the corporation executes and delivers to the respective transferee shareholders irrevocable assignments of any interest in such dividends, it will be considered a satisfactory compliance with the provisions of section 333(a)(2) of the Code relative to the distribution of all of the property under the liquidation within one calendar month.

(4) The requirements of section 333(a)(2) of the Code will be considered to have been complied with if the corporation sets aside a reserve fund, consisting of cash and cash dividends payable after the end of the calendar month selected for distribution, to provide for the payment after the close of such calendar month of any unpaid attorneys' fees, accountants' fees, and other expenses of liquidation and dissolution, as well as of unascertained and contingent liabilities and expenses, if such reserve is set aside in good faith and the amount thereof is reasonable.