IRS WILL ISSUED ADVANCE RULINGS ON COLLAPSIBILITY OF CORPORATIONS WHERE REDEMPTION OF STOCK TO PAY DEATH TAXES

Rev. Proc. 84-39

SECTION 1. BACKGROUND

Rev. Proc. 84-22, 1984-13 I.R.B. 18, contains in section 4 a list of those areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (Technical) in which ruling or determination letters will not ordinarily be issued.

SECTION 2. PROCEDURE

Section 4.0115 of Rev. Proc. 84-22 is modified to read as follows:

Section 341.--Collapsible Corporations.--Whether a corporation will be considered to be a "collapsible corporation," that is, whether it was "formed or availed of" with the view of certain tax consequences. However, ruling requests will be considered on this matter when the enterprise (1) has been in existence for at least 20 years or has clearly demonstrated that it has realized a substantial part of the taxable income to be derived from the manufacturing, constructing, producing, or purchasing of property as defined in section 341(b)(1)(A) of the Code and as described in Rev. Rul. 72-48, 1972-1 C.B. 102, (2) has had an aggregate change in the shareholders' interests of not more than 10 percent during that period (except for transfers among family members, as defined in section 267(c)(4), or redemptions of stock to pay death taxes pursuant to section 303), and (3) has conducted substantially the same trade or business during that period. The period referred to in (2) and (3) above is the lesser of 20 years of corporate existence or the period in which the enterprise has realized a substantial part of the taxable income from activities defined in section 341(b)(1)(A).

SECTION 3. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 84-22 is modified.

SECTION 4. EFFECTIVE DATE

This revenue procedure will apply to all ruling requests on hand in the National Office on April 30, 1984, the date of publication of this revenue procedure in the Internal Revenue Bulletin, as well as to requests received thereafter.