Rev. Proc. 75-11

Sec. 3 of Rev. Proc. 74-26, 1974-2 C.B. 478, which provides operating rules pertaining to issuing ruling letters by the Reorganization Branch of the Corporation Tax Division, is amplified by the addition of the following subsection:

.06 In reorganizations under sections 368(a)(1)(A), 368(a)(1)(B), and 368(a)(1)(C) of the Code where the requisite stock or property has been acquired, a portion of the stock of the acquiring corporation or a corporation in "control" thereof, which is issued in the exchange, may be placed in escrow by the exchanging shareholders for possible return to the acquiring corporation under specified conditions provided (1) there is a valid business reason for establishing the escrow arrangement; (2) the escrowed stock appears as issued and outstanding on the balance sheet of the acquiring corporation and such stock is, in fact, legally outstanding under applicable state law; (3) all dividends paid on the escrowed stock will be distributed currently to the exchanging shareholders; (4) all voting rights of the escrowed stock (if any) are exercisable by or on behalf of the shareholders or their authorized agent; (5) no shares of escrowed stock are subject to restrictions requiring their return to the issuing corporation because of death, failure to continue employment or similar restrictions; (6) all the escrowed stock is released from escrow within five years from the date of consummation of reorganization (except where there is a bona fide dispute as to whom the stock should be released); and (7) at least fifty percent of the number of shares of each class of stock issued initially to the shareholders (exclusive of shares of stock to be issued at a later date as described in .03 above) is not subject to the escrow agreement.