IRS WILL RULE IN ADVANCE ON WHETHER E&P OF CONTROLLED FOREIGN CORP. FROM STOCK EXCHANGED IN SEC. 1248 TRANSACTION SHOULD BE REDUCED BY AMOUNT OF SELLER'S GAIN TREATED AS DIVIDEND

Rev. Proc. 85-27

SECTION 1. BACKGROUND

Rev. Proc. 85-22, 1985-12 I.R.B. 13, sets forth areas in which advance rulings or determination letters will not be issued by the Internal Revenue Service. Section 5 of Rev. Proc. 85-22 is entitled, Areas Under Extensive Study in Which Rulings or Determination Letters Will Not Be Issued Until the Service Resolves the Issue Through Publication of a Revenue Ruling, Revenue Procedure, Regulations or Otherwise.

Section 5.31 provides:

Section 1248 -- Gain From Certain Sales or Exchanges of Stock in Certain Foreign Corporations. -- Whether the earnings and profits of a controlled foreign corporation attributable to stock exchanged in a transaction subject to section 1248 should be reduced by the amount of gain treated as a dividend in the hands of the seller under section 1248(a).

SEC. 2. PROCEDURE

Rev. Proc. 85-22 is hereby modified by deleting section 5.31.

SEC. 3. EFFECTIVE DATE

This revenue procedure is effective May 13, 1985, the date of publication of this revenue procedure in the Internal Revenue Bulletin.

SEC. 4. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 85-22 is modified.