Rev. Proc. 73-10

Section 1. Purpose

The purpose of this Revenue Procedure is to update Revenue Procedure 70-17, 1970-2 C.B. 490, which sets forth in a convenient checklist questionnaire the information necessary to be included in a request for a ruling under section 351 of the Internal Revenue Code of 1954, which relates to transfers to a corporation controlled by the transferor.

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 351 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 Internal Revenue 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 Revenue Procedure 72-3, 1972-1 C.B. 698. Careful attention to all the requirements of that Revenue Procedure will also serve to minimize needless delays in processing requests for rulings.

Sec. 3. Information to be Included in Requests for Rulings Under Section 351 of the Code

Each of the items included in this Section should be specifically dealt with in the application even though apparent nonapplicability exists. For example, if in subsection 3.01-1 the transferee corporation has not yet been formed, the application should identify the item and so state. Presentation of the information should follow the format of this Revenue Procedure as closely as possible. If an item is not applicable, the letters "N.A." may be inserted after that section or subsection to so indicate.

.01 Information regarding transferee corporation

1. Name, identification number, and place and date of incorporation of the transferee corporation.

2 Description of the business of the transferee corporation.

3 The location of the District Office that will have audit jurisdiction over the return of the transferee corporation, or other appropriate party to the transaction, 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 the active examination or audit of a tax return already filed or is being considered by a branch office of the Appellate Division. See Revenue Procedure 72-3, 1972-1 C.B. 698.

.02 Transfer to corporation

1 Property--Describe fully all types and categories of property, tangible and intangible, to be transferred to the corporation by each transferor and identify specifically each transferor.

2 Services--Describe fully all services to be performed by any transferor or other party for or on behalf of the corporate transferee in connection with the transaction and the consideration to be received in exchange therefor.

3 Existing business

(a) Assets and Liabilities--Identify on a balance sheet of the existing business the assets to be transferred to, and the liabilities to be assumed by, the transferee. Indicate which of these assets, if any, were received by a transferor as part of a plan of liquidation of another corporation.

(b) Income and Expenses--State the accounting method of the transferors of an existing business.

(1) Unreported Income--Indicate the amount that will be transferred to the corporation, such as receivables of a proprietorship reporting on the cash receipts and disbursements method of accounting, unfinished construction contracts, commissions due, installment obligations owed by the transferee to the transferor, etc. Identify these amounts on the balance sheet referred to in subsection 3(a) above. Also state the amount of such items of income which will be retained by the transferor. Furnish full information as to the reporting of all unreported income.

(2) Reserve for bad debts--State the amount of any reserve for bad debts attributable to accounts or other receivables being transferred.

(3) Liabilities for Expenses--State the amount that will be assumed by the corporate transferee for which a deduction has not been taken for Federal income tax purposes. Identify these amounts on the balance sheet referred to in subsection 3(a) above. Also state the amount of expenses payable of the business which will not be assumed by the transferee. Furnish full information as to the treatment of all these expenses.

(c) Partners and Partnerships--State whether the partners' interests in the partnership or the partnership's assets will be transferred and whether the partnership will be liquidated. 4 Patents or patent applications--Furnish the following information in regard to each:

(a) The country issuing the patent or in which an application has been filed.

(b) The number of each patent or patent application.

(c) Does the patent or patent application cover a product or process? Describe the product or process.

(d) Is the transferee granted the exclusive right to make, use, and sell the product, or the exclusive right to use the process, in the issuing country for the life of the patent?

(e) Are all the rights granted to the transferor by the issuing country being transferred? Describe any limitations on the use of the patent by the transferee, including the right to sublicense or subassign.

(f) Describe the circumstances under which the patent rights granted to the transferee may be revoked or otherwise terminated.

5 Trade-marks or trade names--Furnish the following information or answers requested in regard to each:

(a) The trade name and a description of the trade-mark.

(b) The country or countries in which the transferee will be granted rights to use the trade-mark or trade name.

(c) Is the transferor the registered user of the trade-mark or trade name in those countries referred to in (b) above? Describe the rights granted to the transferor by each country in which it is a registered user. If the transferor is not the registered user in any of the countries state the rights, if any, which the transferor has with respect to use of the trade-mark or trade name in that country and the laws under which such rights are granted and protected.

(d) Will the transferee have the exclusive right to use in perpetuity the trade-mark or trade name in each case?

(e) Will the transferee be granted all those rights granted to the transferor by each country in which the transferor claims rights exist which are being transferred? Describe any limitations on the use of the trade-mark or trade name, including the right to sublicense or subassign.

(f) Describe the circumstances under which the rights granted to the transferee may be revoked or otherwise terminated.

6 For information and statements required to be included in an application involving an agreement which purports to furnish technical "know-how" in exchange for stock in a transfer within the meaning of section 351 of the Code, see Revenue Procedure 69-19, 1969-2 C.B. 301.

7 Stock of another corporation--If stock of another corporation is part or all of the property transferred, state what percentage of such stock and stock of the corporate transferee is owned actually and constructively by the transferor. (See section 304 of the Code.)

8 Other information on transfer

(a) Retained rights--State what rights, if any, the transferors will retain in the property transferred.

(b) Licenses, leases, etc.--Describe any licenses, leases, etc., to be granted in exchange for stock or securities.

(c) Leaseback--Describe any property to be transferred to the corporation that will be leased back to a transferor, other shareholder, or a related party. Furnish the terms of the lease and identify the lessee.

.03 Liabilities

1 Assumption of liabilities

(a) State the amount and basis of assets.

(1) State the amount of the liabilities that will be assumed by the corporate transferee (including those identified in .02-3(a) above) or to which the property transferred will be subject with respect to each transferor.

(2) Indicate the tax basis of the property transferred by each transferor.

(b) Nature of liability and purpose of assumption--Describe fully each liability, give the date incurred, and explain the circumstances under which the liabilities that will be assumed by the corporate transferee were created. State the business reason or purpose for the assumption of liabilities.

(c) Liability owed to transferee--Identify any of these liabilities to be assumed that are owed to the corporate transferee and explain how they will be discharged.

2 Indicate the amount and types of indebtedness between transferee and transferors, or other shareholders, other than that created by recurring arm's length sales, purchases, etc., in the normal course of business--If a partnership is a transferor, describe any indebtedness between the partnership and partners prior to the exchange. Explain when and how any indebtedness included here was created and how it will be discharged in each case. If this indebtedness was acquired at less than face amount, state the original cost and adjusted basis in the hands of the creditor. .04 Consideration from the transferee

1 Stock--A description of each class and the number of shares of each class to be issued to each person for:

(a) Property--See .02-1 above and identify the property of each transferor.

(b) Services--See .02-2 above and identify the services. Indicate those persons who will also receive stock for property. If the services identified above were not rendered or are not to be rendered for the benefit of the corporate transferee give a full explanation.

2 Indebtedness--State the principal amount of indebtedness and its terms to be created in favor of each person for:

(a) Property--See .02-1 above and identify the property of each transferor.

(b) Services--See .02-2 above and identify the services.

3 Other property in addition to stock and indebtedness--Indicate the amount and provide a complete description of any other property that will be issued to each transferor or other person (identify each) including, but not limited to:

(a) Cash

(b) Stock rights, warrants, or certificates of contingent interest with the terms of each.

4 Consideration substantially in proportion to interest transferred--Will each person receive stock, securities, or other property substantially in proportion to his interest in the property transferred to the corporation or services to be rendered for the benefit of the corporation? If not, give a full explanation.

.05 Control by transferors

1 Stock outstanding immediately before transaction

(a) Furnish a description and the total number of shares of each class outstanding.

(b) State the total number of shares of each class held by a shareholder who will be a transferor in the exchange.

(c) Indicate the total number of shares of each class held by each shareholder owning five percent or more of a class and the number of shareholders owning the balance of each class outstanding.

2 Stock outstanding immediately after transaction

(a) Indicate the total number of shares of each class.

(1) Shares described in .05-1(a) above outstanding immediately before transaction.

(2) Shares described in .04-1(a) above issued for property.

(3) Shares described in .04-1(b) above issued for services.

(b) Indicate the total number and percent of shares of each class held by each transferor.

(1) Shares described in .05-1(b) above held immediately before transaction.

(2) Shares described in .04-1(a) above received for property.

(3) Shares described in .04-1(b) above received for services.

3 Plan and dates of exchanges

(a) Will the transfers and exchanges occur pursuant to a plan agreed upon prior to the transaction in which the rights of the parties are defined? (See section 1.351-1(a)(1) of the regulations.)

(b) If all exchanges will not occur on approximately the same date, give full explanation.

4 Additional stock issues

(a) If any stock will be issued in the near future in addition to that being issued pursuant to the plan, give full particulars.

(b) Public offering planned

(1) Indicate the total number of shares of each class involved.

(2) If underwriters are involved, give names and explain whether the underwriter will purchase such shares for their own account or will act as agent for the transferee corporation.

(c) Stock rights, warrants, or subscriptions

(1) If any of the rights, warrants, or subscriptions of the corporate transferee are outstanding or will be issued or offered in the near future give the total number of shares of each class of stock involved.

(2) Explain the circumstances in which they were or will be issued or offered.

5 Disposition of stock by transferors

(a) Indicate the number of shares of each class, if any, that each transferor will dispose of after the exchange.

(b) State the consideration to be received.

(c) Provide the names of the acquiring parties and their relationship, if any, to the corporate transferee or shareholder-transferor.

(d) State the circumstances and reasons for the disposition including any agreements between the parties.

(e) If there are, or will be, any options to purchase stock from any of the transferors, give full particulars.

.06 General

1 Business reasons or purpose--Explain the business reasons for the transaction.

2 Activities of transferee--Will it remain in existence and retain and use the property transferred to it in an active trade or business?

3 Disposition of property--Identify any of the transferred property that the transferee expects to dispose of other than through normal business operations and give full particulars concerning the proposed disposition.

4 Related, connected, or step transactions--Describe any loans, sales, exchanges, or other transactions, other than recurring arm's length sales, purchases, etc. in the normal course of business, that will occur or are contemplated whether or not considered as related to or in connection with the exchange.

.07 Special corporations

1 Investment Company--Furnish any information not otherwise requested necessary to determine that the transfer is not one described in section 1.351-1(c) of the regulations to any of the investment companies defined in section 1.351-1(c)(1)(ii) of the regulations.

2 Small Business Corporation--Does the corporation intend to make the election under section 1372(a) of the Code to be taxed as a "small business corporation" as defined in section 1371 of the Code?

.08 Copies of documents to be submitted with request

1 Balance sheets--Latest of transferee corporation or other business involved.

2 Plan or agreement of exchange--If one has been committed to writing.

3 Securities--If it is contended that any part or all of the indebtedness described in .04-2(a) above is "securities" within the meaning of section 351 of the Code submit:

(a) A brief explaining why.

(b) A copy of the note or other evidence of the indebtedness and loan agreement, if any.

.09 Assumptions or representations if applicable.

.10 Foreign Transferee--If the transfer is to a foreign corporation, see section 367 of the Code and Revenue Procedure 68-23, 1968-1 C.B. 821.

Sec. 4. Inquiries

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

Sec. 5. Effect on Other Documents

Revenue Procedure 70-17, 1970-2 C.B. 490, is superseded.