Rev. Proc. 75-35

SECTION 355 CHECKLIST

QUESTIONNAIRE

CONTENTS

1. PURPOSE

2. BACKGROUND

3. INFORMATION TO BE INCLUDED IN REQUESTS FOR RULINGS UNDER SECTION 355 OF THE CODE

.01 Information regarding the corporation making the distribution (the Distributing Corporation) and the corporation or corporations whose stock and securities are being distributed (the Controlled Corporation)

1. Identification

2. Taxable year

3. Jurisdiction

.02 Description and ownership of stock and securities

1. Description of outstanding stock

2. Ownership of stock immediately before the distribution

(a) Stock of the Distributing Corporation

(b) Stock of the Controlled Corporation

3. Description of stock and securities to be distributed and retained

(a) Stock

(1) Preferred stock

(b) Securities

(c) Retention of stock or securities

(1) Issuance of debt

(d) Other property

(e) Timing

4. Ownership of stock and securities immediately after the distribution

(a) Shareholders of the Distributing Corporation

(1) Pro rata

(A) Ownership

(B) Securities

(2) Non pro rata

(A) Ownership

(B) Values

(C) Securities

(b) Security holders of the Distributing Corporation

(1) Receiving stock

(2) Receiving securities

(c) Receipt of consideration other than with respect to stock

(1) Shareholder in dual capacity

(2) Other transfers

.03 Information as to the businesses of the Distributing and Controlled Corporation

1. Distributing Corporation

2. Controlled Corporation

(a) Active business to be transferred

(1) Financial statements

(2) Method of accounting

(3) Consideration received

(4) Section 38 property

(b) Controlled Corporation in existence

3. Ownership of stock in other corporations

(a) Percentage

4. Five-year requirement

(a) Continuous operation

(b) Stock ownership

(c) Active business acquired by Distributing, Controlled or other corporation during the preceding five-year period

(1) Identity

(2) Date

(3) Transaction

(4) Consideration

(5) Gain or Loss

(d) Stock of Controlled or other corporation acquired by Distributing Corporation during the preceding five-year period

(1) Identity

(2) Date and consideration

(3) Transaction

(4) Gain or loss

(e) Changes in ownership

(f) Continued operations

(g) Change in business

.04 Business purpose

.05 Information relating to whether the transaction will be considered to be used principally as a device for the distribution of earnings and profits of the Distributing Corporation or of the Controlled Corporation or of both

1. Liquidation

2. Disposition

(a) Transaction

(b) Shares

(c) Consideration 3. Sale of assets

4. Earnings and profits

5. Non pro rata distributions

6. Future stock issues

7. Transfers between Distributing and Controlled Corporation

(a) Contributions to capital

(b) Cancellation of indebtedness

(c) Distribution to distributing Corporation

.06 General

1. Balance sheet

2. Agreements

3. Foreign corporation

4. Inquiries

Section 1. Purpose.

The purpose of this Revenue Procedure is to set forth in a convenient checklist questionnaire the information necessary to be included in a request for a ruling under section 355 of the Internal Revenue Code of 1954 which relates to distributions of stock and securities of a controlled corporation.

Sec. 2. Background.

The Internal Revenue Service receives many requests 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 request 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 355 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 the issuance of rulings in the most expeditious fashion possible.

The authority and general procedures of the National Office of the Service and of the Office of the District Directors of Internal Revenue with respect to the issuance of advance rulings and determination letters are outlined in Rev. Proc. 72-3, 1972-1 C.B. 698. See also Rev. Proc. 72-9, 1972-1 C.B. 718, relating to areas in which advance rulings generally will not be issued. Careful attention to all the requirements of these Revenue Procedures will also serve to minimize needless delays in processing requests for rulings.

Sec. 3. Information to be Included in Requests for Rulings Under Section 355 of the Code.

Each of the items included in this 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 the appropriate descriptive headings. If an item is not applicable, the letters "N.A." may be inserted after that section or subsection to so indicate.

.01 Information regarding the corporation making the distribution (the Distributing Corporation) and the corporation or corporations whose stocks and securities are being distributed (the Controlled Corporation).

1 Identification.--Name, taxpayer identification number, place, and date of incorporation of the Distributing and Controlled Corporations.

2. Taxable year.--State the last day of the taxable year of the Distributing and Controlled Corporations.

3 Jurisdiction.--The location of the District Office that will have audit jurisdiction over the returns of the Distributing and Controlled Corporations and a statement whether, to the best knowledge of the taxpayer or his representative, the identical issue is being considered by any field office of the Service in connection with an active examination or audit of a tax return already filed or is being considered by a branch office of the Appellate Division. See section 3.01 of Rev. Proc. 72-3.

.02 Description and ownership of stock and securities.

1 Description of outstanding stock.--Furnish a complete description of each class of stock outstanding of the Distributing and Controlled Corporations, setting forth the rights and privileges of each class.

2 Ownership of stock immediately before the distribution.

(a) Stock of the Distributing Corporation.--Set forth the number of shares and the percentage of each class of stock outstanding owned by each shareholder of the Distributing Corporation. However, if there are more than 25 shareholders, the number and percentage of shares owned by each shareholder may be limited to those shareholders owning in excess of five percent of the outstanding shares of each class and the total number of shareholders owning the balance of each class.

(b) Stock of the Controlled Corporation.--Set forth the actual number of shares and the percentage of each class of stock of the Controlled Corporation owned by the Distributing Corporation. If there are minority shareholders in the Controlled Corporation, see 3.02(2)(a) above for the information to be furnished.

3 Description of stock and securities to be distributed and retained.

(a) Stock--State the number of shares of each class of stock of the Controlled Corporation to be distributed.

(1) Preferred stock--If preferred stock is distributed and it is contended that such stock is not section 306 stock within the meaning of section 306(c) of the Code, fully explain the reasons for such contention.

(b) Securities.--State the principal amount of each series of securities of the Controlled Corporation to be distributed.

(c) Retention of stock or securities.--State the number of shares of each class of stock or the principal amount of each series of securities of the Controlled Corporation, if any, to be retained by the Distributing Corporation. Submit a detailed explanation of why such retention is not in pursuance of a plan having as one of its principal purposes the avoidance of Federal income tax (see section 1.355-2(d) of the Income Tax Regulations).

(1) Issuance of debt.--State whether the Controlled Corporation intends to issue debt instruments subsequent to the distribution to the Distributing Corporation. If so, provide full particulars as to the principal amount, terms, and reasons for issuance.

(d) Other property.--State the amount and provide full particulars as to any property other than stock and securities of the Controlled Corporation to be distributed by the Distributing Corporation including, but not limited to, cash, and stock rights or warrants (see section 1.355-1(a) of the regulations). Also describe any expenses that may be incurred in the proposed transaction and indicate who will pay the expenses described.

(e) Timing.--Will all of the stock and securities be distributed on the same date? If so, state the approximate date. If not, give full particulars.

4. Ownership of stock and securities immediately after the distribution.

(a) Shareholders of the Distributing Corporation.

(1) Pro rata.--State whether the distribution of the shares of the Controlled Corporation will be pro rata with respect to all the shareholders in the Distributing Corporation. If so, fully describe the details of the transaction.

(A) Ownership.--Set forth the actual number of shares and the percentage of each class of stock in the Distributing and Controlled Corporation to be owned by each shareholder immediately after the distribution. If there are more than 25 shareholders, see 3.022(a) above for the information to be furnished.

(B) Securities.--Identify those shareholders of the Distributing Corporation who will receive securities of the Controlled Corporation, if any, and state the principal amount of each series of securities to be received. With respect to each shareholder, state the principal amount of each series of the securities of the Distributing Corporation to be exchanged therefor or, if no securities are to be exchanged, so state (see Section 1.355-2(e)(1) of the regulations).

(2) Non pro rata.--State whether the distribution of the stock of the Controlled Corporation will be non pro rata with respect to the shareholders of the Distributing Corporation. If so, fully describe the details of the transaction.

(A) Ownership.--Set forth the actual number of shares and the percentage of each class of stock in the Distributing and Controlled Corporations, owned by each shareholder immediately after the distribution. If there are more than 25 shareholders, see 3.022(a) above for the information to be furnished.

(B) Values.--Furnish a statement that the fair market value of the stock of the Controlled Corporation to be received will be equal to the fair market value of the stock of the Distributing Corporation exchanged therefor. If the values will not be equal, provide a full explanation (see section 356(f) of the Code).

(C) Securities.--Identify those shareholders of the Distributing Corporation who will receive securities of the Controlled Corporation, if any, and state the principal amount of each series to be received. With respect to each shareholder, state the principal amount of each series of the securities of the Distributing Corporation to be exchanged therefor or, if no securities are to be exchanged, so state (see section 1.355-2(e)(1) of the regulations).

(b) Security holders of the Distributing Corporation.

(1) Receiving stock.--Identify those security holders who will receive stock of the Controlled Corporation, the total number of shares of each class of stock to be received, and the principal amount of the securities of the Distributing Corporation to be exchanged therefor. If no securities are to be exchanged, so state. If the securities are held by more than 25 shareholders, see 3.022(a) above for the information to be furnished.

(2) Receiving securities.--Identify the security holders who will receive securities of the Controlled Corporation, the principal amount to be received by each, and the principal amount of the securities of the Distributing Corporation to be exchanged therefor. If no securities are to be exchanged, so state. If the securities are held by more than 25 shareholders, see section 3.022(a) above for the information to be furnished.

(c) Receipt of consideration other than with respect to stock.

(1) Shareholder in dual capacity.--State whether all or any part of the consideration distributed by the Distributing Corporation will be received by a shareholder as a creditor, employee, or in some other capacity than that of a shareholder of the Distributing Corporation pursuant to section 355 of the Code.

(2) Other transfers.--State whether the shareholders of the Distributing Corporation will transfer or surrender any property to the Distributing Corporation in the transaction other than stock or securities of the Distributing Corporation. If so, provide full particulars.

.03 Information as to the businesses of the Distributing and Controlled Corporation.

1 Distributing Corporation.--Submit a complete description of the business or businesses conducted directly by the Distributing Corporation. Furnish the information necessary to establish whether each business described will be considered to be an active business (Active Business) within the meaning of Rev. Rul. 75-160, 1975-1 C.B. 112. In general, such description should establish that substantial managerial and operational activities are directly carried on by the corporation. In addition, submit detailed profit and loss statements of the Distributing Corporation for the preceding 5-year period.

2 Controlled Corporation.

(a) Active business to be transferred.--If it is intended that, as part of the plan, the Distributing Corporation will transfer all of the assets of one of its Active Businesses or part of the assets of a single Active Business (Rev. Rul. 64-147, 1964-1 C.B. 136) to a newly formed or pre-existing Controlled Corporation, identify the Active Business and furnish the following information:

(1) Financial statements.--Furnish a balance sheet setting forth the assets to be transferred, in their approximate amounts, to the Controlled Corporation and the liabilities to be assumed or to which the property transferred is subject. State whether the amount of liabilities to be assumed plus the amount of liabilities to which the transferred property is subject will not exceed the total adjusted basis of the property to be transferred. If liabilities are to be assumed, indicate whether the liabilities to be assumed were incurred in the normal course of business and whether they are associated with the assets to be transferred. If the transfer involves all of the assets of an Active Business, submit detailed profit and loss statements for the preceding five-year period with respect to the Active Business to be transferred.

(2) Method of accounting.--State the method of accounting of the Distributing Corporation.

(3) Consideration received.--Set forth the consideration to be received by the Distributing Corporation.

(4) Section 38 property.--State whether any property described in section 38 of the Code will be transferred.

(b) Controlled Corporation in existence.--Submit the information requested with respect to the Distributing Corporation in 3.03 1 above with respect to each business conducted directly by the Controlled Corporation. In addition, submit detailed profit and loss statements of the Controlled Corporation for the preceding five-year period.

3 Ownership of stock in other corporations.--If the Distributing or Controlled Corporation is not directly engaged in an Active Business and it is contended that either the Distributing or Controlled Corporation will be so engaged indirectly, through ownership of stock and securities in a corporation (or corporations) controlled by it immediately after the distribution (Other Corporation), provide the information requested with respect to the Distributing Corporation in 3.03 1 above as to each Other Corporation (see section 355(b)(2)(A) of the Code). In addition, submit detailed profit and loss statements of the Other Corporation for the preceding five-year period.

(a) Percentage.--State the percentage of the fair market value of the gross assets of the Distributing or Controlled Corporation that will be represented by the stock of the Other Corporation immediately after the distribution.

4. Five-year requirement.--Provide the following information with respect to each Active Business, described in 3.03 1, 2(b), and 3 above, conducted by the Distributing, Controlled, and Other Corporation.

(a) Continuous operation.--State which Active Business has been continuously conducted by the Distributing, Controlled, and Other Corporation, within the meaning of section 1.355-1(c) of the regulations, for the five-year period immediately preceding the date of distribution and the date such Active Business was commenced or acquired.

(b) Stock ownership.--Identify the Controlled and Other Corporation whose shares have been continuously held, for the five-year period immediately preceding the date of distribution, by the Distributing Corporation.

(c) Active Business acquired by Distributing, Controlled or Other Corporation during the preceding five year period.

(1) Identify.--Identify the party from whom the business was acquired and his relationship to the Distributing Corporation or its shareholders.

(2) Date.--Set forth the date that the business was acquired and the period of time such business had been previously conducted by the Distributing, Controlled, or Other Corporation's predecessor in interest.

(3) Transaction.--Describe the transaction in which the business was acquired; for example, acquired in a reorganization under section 368(a)(1) of the Code, acquired by purchase, etc. If a ruling letter was issued with respect to the transaction, submit a copy.

(4) Consideration.--State the consideration given in the acquisition.

(5) Gain or loss.--State whether gain or loss was recognized, in whole or in part, by any party to the transaction.

(d) Stock of Controlled or Other Corporation acquired by Distributing Corporation during the preceding five-year period.

(1) Identify.--Identify the party from whom the stock was acquired and his relationship to the Distributing Corporation or its shareholders.

(2) Date and consideration.--Set forth the date that the stock was acquired and the consideration given in the acquisition.

(3) Transaction.--Describe the transaction in which the business was acquired; for example, acquired in a reorganization under section 368(a)(1) of the Code, acquired by purchase, etc. If a ruling letter was issued, with respect to the transaction, submit a copy.

(4) Gain or loss.--State whether gain or loss was recognized, in whole or in part, by any party to the transaction.

(e) Changes in ownership.--Provide full particulars as to any changes in the Distributing Corporation's stock ownership in the Controlled and Other Corporations during the five-year period preceding the distribution, including, but not limited to, acquisitions, redemptions, recapitalizations, stock dividends, and sales.

(f) Continued operations.--Furnish a statement that each Active Business conducted immediately before the distribution will be conducted as an Active Business after the distribution.

(g) Change in business.--Describe any substantial change in the type of business activity during the preceding five-year period such as the addition of new and the dropping of old products, changes in production capacity, extraordinary purchases, replacements or sales of assets, and change of business location (see section 1.355-4(b)(3) of the regulations).

.04 Business purpose.--Describe in detail the business purpose or purposes, for the distribution of the stock of the Controlled Corporation. Give full particulars why such business purpose, or purposes, are germane to the business of the corporations (see section 1.355-(2)(c) of the regulations and Rev. Rul. 69-460, 1969-2 C.B. 51).

.05 Information relating to whether the transaction will be considered to be used principally as a device for the distribution of earnings and profits of the Distributing Corporation or of the Controlled Corporation or of both.

1 Liquidation.--Furnish a statement that neither the Distributing Corporation nor the Controlled Corporation will be liquidated subsequent to the transaction. If any plan to liquidate either the Distributing Corporation or the Controlled Corporation exists, give full particulars.

2 Disposition--Furnish a statement that there is no plan, by the shareholders of the Distributing or Controlled Corporations, to sell, exchange, transfer by gift, or otherwise dispose of any or all of their shares of stock subsequent to the consummation of the transaction (see section 1.355-2(b)(1) of the regulations). If such plan exists, provide the following information.

(a) Transaction.--Give full particulars as to the type of transaction intended including any agreements existing between the parties.

(b) Shares.--Set forth the number of shares of each class of stock that each shareholder will dispose of.

(c) Consideration.--Set forth the consideration to be received.

3 Sale of assets.--Provide full particulars as to any contemplated sale of assets of the Distributing or Controlled Corporation other than in the normal course of business.

4 Earnings and profits.--Furnish a statement whether the Distributing and Controlled Corporations will have any earnings and profits, within the meaning of section 316 of the Code, at the date of the distribution or at the close of their respective taxable years. This information aids the Service in determining whether the proposed transaction is to be used principally as a device for the distribution of earnings and profits. See Rev. Rul. 71-384, 1971-2 C.B. 181.

5 Non pro rata distributions.--State whether all or any part of the distribution, if considered taxable, would also qualify as an exchange under section 302(b) of the Code (see Rev. Rul. 64-102, 1964-1 (Part I) C.B. 136, and Rev. Rul. 71-383, 1971-2 C.B. 180).

6 Future stock issues.--Provide a full description if it is contemplated that any stock is to be issued by the Distributing or Controlled Corporation other than that being distributed pursuant to the plan. Such description should include, but is not limited to, a description of the stock of the Distributing or Controlled Corporation to be issued pursuant to a public offering or pursuant to the exercise of stock rights or warrants.

7 Transfer between Distributing and Controlled Corporation.

(a) Contributions to Capital.--Give full particulars as to any contributions of property to be made by the Distributing Corporation, as part of the plan, to the capital of the Controlled Corporation.

(b) Cancellation of Indebtedness. -- With respect to any indebtedness between the Distributing and Controlled Corporation, give full particulars as to the principal amount of the indebtedness, the circumstances under which it arose, and the date and method under which such indebtedness will be discharged.

(c) Distribution to Distributing Corporation. -- Provide full particulars as to any distribution of property by the Controlled Corporation, as part of the plan, to the Distributing Corporation.

.06 General.

1 Balance sheet. -- Furnish the most recent year end balance sheet of those corporations described in 3.03 1, 2(b), and 3 above.

2 Agreements. -- Furnish the plan or agreement of exchange if reduced to writing.

3 Foreign corporation. -- If either the Distributing or Controlled Corporation is a foreign corporation, see section 367 of the Code and Rev. Proc. 68-23, 1968-1 C.B. 821.

Sec. 4. 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