IRS WILL RULE ON CERTAIN 'SUBISSUES' IN MERGERS, CONSOLIDATIONS, AND REORGANIZATIONS.

Rev. Proc. 91-54

SECTION 1. PURPOSE

This revenue procedure modifies the list of "no-rule" areas of Rev. Proc. 91-3, 1991-1 I.R.B. 9, to permit the issuance of advance rulings with respect to certain significant subissues that must be resolved in order to determine whether section 351 of the Internal Revenue Code applies to an exchange of stock for stock in the formation of a holding company, whether the acquisition of stock in the formation of a holding company is a reorganization under section 368(a)(1)(B) or whether a transaction is a reorganization under section 368(a)(1)(F).

SEC. 2. BACKGROUND

Section 3 of Rev. Proc. 91-3 lists the areas of the Internal Revenue Code under the jurisdiction of the Office of the Associate Chief Counsel (Technical) in which the Internal Revenue Service will not issue advance rulings or determination letters. Rev. Proc. 91-3 incorporates certain items that were added to the list of no-rule areas in 1990 in order to permit the Service to use resources more efficiently. To this end, Rev. Proc. 91-3 provides that rulings will not be issued with respect to certain formations of holding companies under section 351 and section 368(a)(1)(B), mergers and consolidations under section 368(a)(1)(A) (including those qualifying because of section 368(a)(2)(D) or section 368(a)(2)(E)) and transactions under section 368(a)(1)(F). See Rev. Proc. 91-3, sections 3.0123, 3.0125, 3.0126 and 3.0129, superseding in part Rev. Proc. 90-56, 1990-2 C.B. 639.

When it added these items to the no-rule areas, the Service retained its discretion to rule on significant subissues that must be resolved to determine whether a transaction qualifies under section 368(a)(1)(A) of the Code (including those qualifying because of section 368(a)(2)(D) or section 368(a)(2)(E)). However, no exception to the new no-rule areas was provided for subissues in no-rule transactions under sections 351, 368(a)(1)(B) or 368(a)(1)(F). See section 2 of Rev. proc. 90-56, now incorporated in sections 3.0123, 3.0125, 3.0126 and 3.0129 of Rev. Proc. 91-3.

Rev. Proc. 90-56 further provided that six months following publication, the Service would assess the resource burden of issuing rulings on subissues under section 368(a)(1)(A), section 368(a)(2)(D) and section 368(a)(2)(E), and would consider revising its practice. The Service has now assessed the resource burden of issuing rulings on the above subissues. Based on this assessment, it has decided to extend its discretion to issue rulings on subissues to include subissues in each of the other no-rule areas established by Rev. Proc. 90-56.

SEC. 3. PROCEDURE

Rev. Proc. 91-3 is modified as follows: The Service will have the discretion to rule on significant subissues that must be resolved to determine whether a transaction that is in any no-rule area established by Rev. proc. 90-56 qualifies under section 351 or section 368 of the Code. However, the Service will only rule on these subissues if in the view of the Service they are significant and not clearly and adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice or other authority published in the Internal Revenue Bulletin.

To obtain a ruling on a subissue, the taxpayer must explain the significance of the subissue, set forth the authorities most closely related to the subissue, and explain why the subissue is not resolved by the authorities. The Service will require the taxpayer or the taxpayer's representative (as the Service deems appropriate) to state to the best of knowledge and belief that the transaction will (or will not) qualify under the primary Code section that is in the no- rule area if the Service rules as the taxpayer proposes on the subissue.

A taxpayer may seek a presubmission conference to determine whether a ruling on a subissue can be obtained under this section. See section 10.13 of Rev. Proc. 91-1, 1991-1 I.R.B. 9, 29. If the Service issues a ruling on a subissue, the ruling will state that no opinion is expressed on whether the transaction in question qualifies under the primary Code section.

SEC. 4. FUTURE CHANGES IN RULINGS PRACTICE

The Service will monitor the resource burden of issuing rulings on subissues under the no-rule areas established by Rev. Proc. 90-56 and will make future changes in its rulings practice as appropriate.

SEC. 5. EFFECT ON OTHER DOCUMENTS

Sections 3.0123, 3.0126 and 3.0129 of Rev. proc. 91-3 are modified.

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective as of August 30, 1991.

DRAFTING INFORMATION

The principal author of this revenue procedure is Marc A. Shapiro of the Office of Assistant Chief Counsel (Corporate). For further information regarding this revenue procedure contact Mr. Shapiro on (202) 566-3938 (not a toll-free call).