Rev. Proc. 81-52

SECTIONS 331 AND 337 CHECKLIST QUESTIONNAIRE

CONTENTS

1. PURPOSE

2. BACKGROUND

3. CHANGES

4. INFORMATION TO BE INCLUDED IN REQUESTS FOR RULINGS UNDER SECTION 337 OF THE CODE.

.01 Information Regarding the Liquidating Corporation (the Distributor)

1 Identification

2 Business

3 Tax year

4 Jurisdiction

5 Description of stock and shareholders

(a) Description of outstanding stock.

(b) Ownership of stock

6 Financial statements

7 Method of accounting

.02 Information Regarding the Purchase of the Distributor's Assets

.03 Information Regarding the Plan of Liquidation

1 The plan of liquidation

(a) Formal plan

(b) Prior informal plan

(c) Recission of a prior plan

2 Sales or other dispositions of assets pursuant to the plan

(a) Sales pursuant to the plan

(1) General description

(2) Method of payment

(b) Other dispositions of assets pursuant to the plan

(c) Miscellaneous

(1) Stock in trade

(d) Sales or other dispositions prior to adoption of the plan

3 Distribution of assets

(a) Assets distributed directly to shareholders

(1) The assets (2) Dates

(b) Assets distributed to a partnership and to an escrow for the purpose of timely liquidating the Distributor

(1) The assets

(2) Dates

(3) The partnership and the escrow

(c) Assets distributed to a liquidating trust

(1) The trust

(2) Assets distributed to the trust

(A) The assets

(B) Dates

(3) Classification of the trust

(d) Assets distributed for the benefit of missing shareholders or for the benefit of dissenters

(1) Reason and person to whom distribution will be made

(2) Assets to be distributed

(A) The assets

(B) Dates

(e) Assets retained

(1) Reason for retention

(2) Description of retained assets

(3) Description of claims

(4) Period of retention

4. The redemption and cancellation of the Distributor's stock

(a) Redemption of all stock

(b) Non pro rata redemption

(c) Shareholder and the Distributor in a dual capacity

5. Status of liquidation

(a) Corporate charter

6. Liquidation-Reincorporation

7. Miscellaneous

(a) Subsidiaries of the Distributor

(b) Collapsible corporation

(c) Section 333 of the Code

.04 Recognition of Gain or Income to the Distributor

1 Unreported or anticipatory assignment of income

2 Reserve for bad debts

3 Installment obligations and recapture provisions

.05 Solvency

.06 Transactions in Addition to the Sales or Exchanges and the Complete Liquidation

1 Related transactions

5. INQUIRIES.

6. EFFECT ON OTHER DOCUMENTS.

SECTION 1. PURPOSE

The purpose of this Revenue Procedure is to update Rev. Proc. 75-32, 1975-2 C.B. 555, which sets forth in a convenient checklist questionnaire the information necessary to be included in a request for a ruling under section 337 of the Internal Revenue Code (and its related section, 331) which relates to the nonrecognition of gain or loss on sales or exchanges in connection with a complete liquidation of a corporation (the Distributor).

SEC. 2. BACKGROUND

The Internal Revenue Service receives many request for rulings in which the information furnished as to the proposed transaction is not complete enough to permit a determination to be made. In such cases it is necessary to secure additional facts from the taxpayer before the ruling requests can be considered. This procedure is time-consuming for both Service personnel and taxpayers and delays issuance of the final ruling letter. This checklist will facilitate the filing of requests for rulings under section 337 of the Code by showing specific information which should be included so that the application will be as complete as possible when originally filed. However, since the information necessary to rule on a particular transaction depends upon all the facts and circumstances of that case, information in addition to that suggested in this revenue procedure may be required. Nevertheless, careful use of the checklist should avoid much needless delay and permit rulings to be issued sooner.

The authority and general procedure of the National Office of the Service and of the Office of the District Directors of Internal Revenue with respect to the issuance of rulings and determination letters are outlined in Rev. Proc. 80-20, 1980-1 C.B. 633 as amended by Rev. Proc. 81-33, page 564, this Bulletin. See also Rev. Proc. 81-10, 1981-1 C.B. 647, relating to areas in which advance rulings or determination letters will not be issued. Careful attention to all the requirements of those Revenue Procedures will serve to minimize needless delays in processing requests for rulings.

SEC. 3. CHANGES

.01 Section 1 has been changed to indicate that the purpose of the revenue procedure is to update Rev. Proc. 75-32.

.02 Sections 2 and 4 have been modified by substituting Rev. Proc. 80-20, 1980-1 C.B. 633 as amended by Rev. Proc. 81-33, and Rev. Proc. 81-10, 1981-1 C.B. 647, for Rev. Proc. 72-3, 1972-1 C.B. 698, and Rev. Proc. 72-9, 1972-1 C.B. 718, respectively. The latter have been superseded.

.03 Section 4 has been modified to request a brief explanation why an item of information is believed to be nonapplicable.

.04 Section 4.014 has been expanded regarding whether the identical issue presented in the ruling request is, or has been, under consideration elsewhere in the Service.

.05 Section 4.015 has been expanded to request information about the Distributor's shareholders and their stock holdings in Distributor.

.06 Section 4.02 has been expanded to ask whether there was, or will be, any transfer or sale of the assets of the Distributor to a corporation the stock of which is wholly or partly owned by the Distributor.

.07 Section 3.032(c)(2) of Rev. Proc. 75-32 has been deleted.

.08 Section 4.033(b) has been expanded to request information concerning the distribution of assets to a partnership and to an escrow, for the purpose of timely liquidating the Distributor.

.09 Section 4.033(c)(3). The reference to "a bona fide liquidating trust" has been deleted.

.10 Section 4.033(e)(1) has been expanded to comply with section 1.337-2(b) of the Income Tax Regulations by requesting a statement whether any assets will be retained to satisfy claims of any shareholders with respect to their stock.

.11 Section 4.035 has been expanded to request a statement that the status of liquidation will exist at the time of the first liquidating distribution and will continue until the final liquidating distribution is made.

.12 The first sentence of section 4.036 has been restated to ask whether the liquidation will be preceded or followed by the reincorporation in, or transfer or sale to, a recipient corporation of any of the business or assets of the Distributor, where more than 20 percent in value of the stock of both the Distributor and the recipient corporation is owned by the same shareholders.

.13 Section 4.037(b) has been modified to delete the last sentence which previously had indicated that if the Distributor desired a ruling determining whether it is a collapsible corporation as defined in section 341(b) of the Code (or is not considered a collapsible corporation pursuant to section 341(e)), the ruling request should so indicate.

.14 Section 4.042 has been reworded to read: "State whether the Distributor has maintained a reserve for bad debts".

.15 The reference in section 4.043 to section 453(d) of the Code has been changed to section 453B and various additional information is being requested under section 4.043 relating to whether the shareholders will elect out of section 453 treatment for installment obligations received from the Distributor and the nature and the terms of the obligations.

.16 Section 4.05 has been reworded to request the following: Will the fair market value of the assets of the Distributor exceed its liabilities both on the date of adoption of the plan of complete liquidation and at the time the final liquidating distribution is made?

.17 Section 4.06 has been added to request information as to multiple transactions.

.18 Section 6 provides that Rev. Proc. 75-32 is superseded.

SEC. 4. INFORMATION TO BE INCLUDED IN REQUESTS FOR RULINGS UNDER SECTION 337 OF THE CODE

Each of the items included in the section should be specifically dealt with in the application even though apparent nonapplicability exists. Presentation of the information required should follow the format of this revenue procedure as closely as possible with appropriate descriptive headings. If an item is believed not to be applicable, so state and briefly explain the reason for nonapplicability. Processing ruling requests is significantly expedited by providing all the information requested in exactly the order in which it is requested herein.

.01 Information Regarding the Liquidating Corporation (the Distributor).

1 Identification.--State the name, taxpayer identification number, and place and date of incorporation of the Distributor.

2 Business.--Furnish a brief description of the business or businesses of the Distributor.

3 Tax year.--State the last day of the Distributor's taxable year.

4 Jurisdiction.--State the location of the District Office that will have audit jurisdiction over the return of the Distributor and state whether, to the best knowledge of the taxpayer and the taxpayer's representative(s), if any, the identical issue is in a return of the taxpayer (or of a related taxpayer within the meaning of section 267 of the Code, or a member of an affiliated group of which the taxpayer is also a member within the meaning of section 1504) and, if so, whether the issue (1) is being examined by a District Director, (2) has been examined and the statutory period of limitation on assessment or refund of tax has not expired or a closing agreement covering the issue or liability has not been entered into by a District Director, (3) is being considered by an Appeals office in connection with the taxpayer's return for an earlier period, or that issue has been considered by an Appeals office and the statutory period of limitation on assessment or refund of tax has not expired or a closing agreement covering the issue or liability has not been entered into by an Appeals office, or (4) is pending in litigation in a case involving the taxpayer or a related taxpayer. The request must contain a statement whether, to the best of the knowledge of the taxpayer and the taxpayer's representative(s), the identical or similar issue has been ruled on by the Service to the taxpayer or to the taxpayer's predecessor and, if so, when and with what results. If after the request is filed but before a ruling is issued, the taxpayer knows that an examination of the issue by a District Director has been started, the taxpayer must notify the National Office of such actions. If a return is filed before a ruling is received from the National Office concerning the return, a copy of the request must be attached to the return. This alerts the District Office and avoids premature District action on the issue.

5 Description of stock.--

(a) Description of outstanding stock.--Furnish a complete description of each class of the Distributor's outstanding stock (or other evidence of equity ownership), summarizing the rights and privileges of each class.

(b) Ownership of Stock.--State whether the stock is closely or widely held, and if the former, identify the shareholders, and the number of shares of each class held by each shareholder. If widely held, give the number of shareholders and the largest number of shares held by a shareholder.

6 Financial statements.--Furnish the most recent balance sheet of the Distributor.

7 Method of accounting.--State the Distributor's method of tax accounting for federal income tax purposes.

.02 Information Regarding the Purchaser of the Distributor's Assets.--State the identity of the Purchaser or Purchasers if known, and indicate whether the Purchaser is an individual, partnership, corporation, or other entity. If the Purchaser is a corporation, state whether any shareholder of the Purchaser owns stock of both the Distributor and the Purchaser. If so, furnish full details concerning the stock ownership involved. In this regard, see section 3.018 of Rev. Proc. 81-10 which provides that rulings will not be issued under section 337 of the Code in situations where property of the Distributor is sold to another corporation and more than a nominal amount of the stock (that is, more than 20 percent in value) of both the Distributor and the Purchaser is owned by the same persons. State whether there was, or will be, any transfer or sale of the Distributor's assets to a corporation the stock of which is wholly or partly owned by the Distributor. If so, furnish full details concerning such transaction and the stock ownership involved.

03 Information Regarding Plan of Liquidation.

1 The plan of liquidation.

(a) Formal plan.--State whether the plan has been or will be adopted by the directors and shareholders and give the date or expected date of approval or adoption. Submit a copy of the plan of liquidation adopted or to be adopted. See Rev. Rul. 57-140, 1957-1 C.B. 118.

(b) Prior informal plan.--Furnish any information which indicates that a plan of liquidation may have been informally adopted prior to the date set forth in 4.031(a) above, Such information is not restricted to, but might include, facts indicating an informal agreement to liquidate by a significant number of shareholders or the sale of a substantial portion of the Distributor's assets prior to the formal date of adoption of the plan. See Rev. Rul. 65-235, 1965-2 C.B. 88.

(c) Rescission of a prior plan.--State whether the Distributor has ever adopted a plan of liquidation, and, if so, provide full particulars regarding the abandonment or rescission of such plan. In this regard, indicate whether Form 966, Corporate Dissolution or Liquidation, was filed in connection with the adoption of such plan and provide pertinent dates and reasons for abandoning or rescinding the prior plan.

2 Sales or other dispositions of assets pursuant to the plan.

(a) Sales pursuant to the plan.

(1) General description.--Describe the assets to be sold pursuant to the plan of liquidation and the consideration to be paid for the assets if an agreement has been reached by the time the ruling request is filed. Submit copies of all sales contracts presently in existence pursuant to which the assets of the Distributor will be sold.

(2) Method of payment.--State the consideration to be paid by the purchaser for the assets to be sold. In this regard, summarize in the ruling request all pertinent portions of existing sales contracts relating to the method of payment. See section 9.05 of Rev. Proc. 80-20.

(b) Other dispositions of assets pursuant to the plan.--Describe any other disposition of assets (for example, involuntary conversions) which will occur during the prescribed liquidation period which the Distributor intends to treat as sales or exchanges pursuant to section 337 of the Code. Furnish complete details concerning these items.

(c) Miscellaneous.

(1) Stock in trade.--If substantially all of the stock in trade or inventory of the Distributor will be sold to one person in one transaction, furnish details concerning this sale.

(d) Sales or other dispositions prior to adoption of the plan.--State whether the Distributor sold or otherwise disposed of any assets at a loss for federal income tax purposes, other than in the ordinary course of business, within the two-year period preceding the date of adoption of the plan of liquidation. If so, furnish details, including the cost basis of each item and the amount for which each item was sold.

3 Distribution of assets.--

(a) Assets distributed directly to shareholders.

(1) The assets.--Describe the assets to be distributed directly to the shareholders.

(2) Dates.--State whether all distributions directly to the shareholders will be made within 12 months of the date of adoption of the plan.

(b) Assets distributed to a partnership and to an escrow for the purpose of timely liquidating the Distributor. See Rev. Rul. 77-321, 1977-2 C.B. 98.

(1) The assets.--Describe the assets to be distributed to the partnership and escrow.

(2) Dates.--State whether the distributions to the partnership and escrow will be made within 12 months of the date of adoption of the plan.

(3) The partnership and the escrow.--Fully describe the partnership, its partners and operation, and the escrow.

(c) Assets distributed to a liquidating trust.--State whether the plan of liquidation requires the use of a liquidating trust or if the use of a liquidating trust is otherwise contemplated. See Rev. Rul. 72-137, 1972-1 C.B. 101.

(1) The trust.--State the reasons for using a trust, whether the use of the trust is permitted under applicable law, the powers and identity of the trustee, and the time period during which the trust will remain in existence.

(2) Assets distributed to the trust.

(A) The assets.--Describe the assets to be distributed to the liquidating trust.

(B) Dates.--Indicate when the distribution will be made to the trust under the plan of liquidation.

(3) Classification of the trust.--In issuing a ruling under sections 331 and 337 of the Code in a situation where a liquidating trust is used, it is the practice of the Service to state in the ruling letter that the ruling is valid only if the trust is not an association taxable as a corporation under section 301.7701 of the Procedure and Administration Regulations. However, if the Distributor desires a ruling concerning the classification of the trust under section 301.7701, the ruling request should so indicate and it should include an additional copy of the entire ruling request.

(d) Assets distributed for the benefit of missing shareholders or for the benefit of dissenters.

(1) Reason and person to whom distribution will be made.--State the reason for such distribution and state whether a distribution to a state official, a trustee, escrow agent, or other person is contemplated.

(2) Assets to be distributed.

(A) The assets.--Describe the assets to be distributed to the state official, trustee, escrow agent, or other person involved.

(B) Dates.--State whether all distributions will be made within 12 months of the date of adoption of the plan.

(e) Assets retained.

(1) Reason for retention.--If assets will be retained, set forth the reasons for their retention. Specifically state whether any assets will be retained to satisfy claims of any shareholders with respect to their stock.

(2) Description of retained assets.--Describe the assets to be retained.

(3) Description of claims.--Describe the claims to be satisfied with retained assets.

(4) Period of retention.--State whether the assets retained will be distributed as soon as all claims are satisfied.

4 The redemption and cancellation of the Distributor's stock.--

(a) Redemption of all stock.--State whether all of the outstanding stock of the Distributor will be redeemed and cancelled.

(b) Non pro rata redemption.--If the property to be used in redemption of the Distributor's stock will not be distributed in exact proportion with the percentage of shares owned by each shareholder, submit reasons and details.

(c) Shareholder and the Distributor in a dual capacity.--State whether all or any part of the consideration from the Distributor will be received by a shareholder as a debtor, creditor, or employee, or some capacity other than that of a shareholder of the Distributor whose stock is being redeemed pursuant to sections 331 and 337 of the Code.

5 Status of liquidation.--State whether the Distributor will cease to be a going concern and its activities limited to the winding up of its affairs, paying its debts, and distributing any balance to its shareholders. Furnish the following statement: the status of liquidation will exist at the time of the first liquidating distribution and will continue until the final liquidating distribution is made.

(a) Corporate charter.--State whether the Distributor intends to abandon its corporate charter. See Rev. Rul. 54-518, 1954-2 C.B. 142, and Rev. Rul. 60-50, 1960-1 C.B. 150.

6 Liquidation-Reincorporation.--State whether the liquidation will be preceded or followed by the reincorporation in, or transfer or sale to, a recipient corporation (Recipient of any of the business or assets of the Distributor, if persons holding more than 20 percent in value of the stock in the Distributor also hold more than 20 percent in value of the stock in the recipient. If so, furnish complete details and reasons. See Rev. Rul. 61-156, 1961-2 C.B. 62. In this regard, note that sections 3.017 of Rev. Proc. 81-10 indicates that the Service generally will not issue rulings on the tax effect of the liquidation of a corporation preceded or followed by the reincorporation of all or a part of the business or assets where more than a nominal amount of the stock (that is, more than 20 percent in value) of both the liquidating corporation and the transferee corporation are owned by the same shareholders.

7 Miscellaneous.--

(a) Subsidiaries of the Distributor.--State whether any subsidiaries of the Distributor were or will be liquidated in connection with the liquidation of the Distributor. If a subsidiary will be liquidated and a ruling is requested that such liquidation will qualify under section 332, see Rev. Proc. 73-17, 1973-2 C.B. 465, in requesting such ruling. In this regard, also see Rev. Rul. 69-172, 1969-1 C.B. 99, which discusses the liquidation of a subsidiary in close proximity with the liquidation of the parent thereof.

(b) Collapsible corporation.--In issuing a ruling under sections 331 and 337 of the Code, it is the practice of the Service to state in the ruling letter that the ruling under section 331 is valid only if section 341(a) is not applicable and that the ruling under section 337 is valid only if the Distributor is not a collapsible corporation as defined in section 341(b) (or is not considered a collapsible corporation pursuant to section 341(e)(4)).

(c) Section 333 of the Code.--State whether the shareholders of the Distributor will elect to have section 333 apply to the proposed liquidation. If so, the provisions of section 337 will not be applicable. See section 337(c)(1)(B) of the Code.

.04 Recognition of Gain or Income to the Distributor.--If it is contended that neither gain nor income will be recognized to the Distributor upon the distribution of property, state the reasons including statements with respect to the following:

1 Unreported or anticipatory assignment of income.--State whether the Distributor will distribute to the shareholders any assets which represent unearned income to the Distributor, such as receivables being reported on a cash basis, unfinished construction contracts, commissions due, or other similar assets.

2 Reserve for bad debts.--State whether the Distributor has maintained a reserve for bad debts.

3 Installment obligations and recapture provisions.--State whether the Distributor will distribute to the shareholders in liquidation any installment obligations (section 453(B) of the Code or property described in sections 48, 341(f), 617(d), 1245(a), 1250(c), 1251(e) or 1252(a) or other assets the cost of which had previously been deducted for Federal income tax purposes. See Rev. Rul. 74-396, 1974-2 C.B. 106.

If installment obligations will be distributed, describe the nature and terms of the obligations and state whether the shareholders will elect out of section 453 treatment for installment obligations received from the Distributor.

.05 Solvency.--Will the fair market value of the assets of the Distributor exceed its liabilities both on the date of adoption of the plan of complete liquidation and at the time and final liquidating distribution is made?

.06 Transactions in Addition to the Sales or Exchanges and Complete Liquidation.

1 Related transactions.--If the request deals with only one step of a larger integrated transaction, the facts, circumstances, etc., relating to the entire transaction must be submitted.

SEC. 5. INQUIRIES.

Inquiries in regard to this revenue procedure should refer to its number and should be addressed to the Assistant Commissioner (Technical), Attention: T:C:R: Internal Revenue Service. Washington, D.C. 20224.

SEC. 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 75-32 is superseded.