Rev. Proc. 75-32

SECTIONS 331 AND 337 CHECKLIST QUESTIONNAIRE

CONTENTS

1. Purpose

2. Background

3. 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. Taxable year

4. Jurisdiction

5. Description of stock

(a) Description of outstanding stock

6. Financial statements

7. Method of accounting

02. Information Regarding the Purchaser 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) Rescission 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

(2) Covenant not to compete

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

3. Distribution of assets

(a) Assets distributed directly to shareholders

(1) The assets

(2) Dates

(b) 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

(c) 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

(d) 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

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 337 of the Internal Revenue Code of 1954 (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 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 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 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 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 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. Information to be Included in Requests for Rulings Under Section 337 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 appropriate descriptive headings. If an item is not applicable, the letters "N.A." may be inserted after the section or subsection to so indicate.

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. Taxable 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 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 Rev. Proc. 72-3.

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.

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 3.019 of Rev. Proc. 72-9 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.

03. Information Regarding the 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 303.1(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 6.02 of Proc. 72-3.

(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.

(2) Covenant not to compete.--If the business or businesses of the Distributor will be sold or otherwise acquired by another person, state whether the Distributor will receive consideration for an agreement not to compete with the acquiring person. If it will, state whether the Distributor intends to report the consideration allocable to such covenant not to compete as ordinary income. See Rev. Rul. 74-29, 1974-1 C.B. 79.

(d) Sales or other dispositions prior to the 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 shareholders will be made within 12 months of the date of adoption of the plan.

(b) 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 cable 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 used is a bona fide liquidating trust and 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.

(c) 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.

(d) Assets retained.

(1) Reason for retention.--If assets will be retained set forth the reasons for their retention.

(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.

(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.--Indicate whether the shareholders of the Distributor plan to reincorporate in a new corporation any part of the business or assets to be distributed in the liquidation or to transfer any part of such business or assets to any existing corporation in which they are shareholders. If so, furnish complete details and reasons. See Rev. Rul. 61-156, 1961-2 C.B. 62. In this regard, note that section 3.018 of Rev. Proc. 72-9 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 and 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)). If the Distributor desires a ruling determining its status in this regard, the ruling request should so indicate and it should include an additional copy of the entire ruling request.

(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 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.--If the Distributor will distribute to its shareholders any receivables, state the amount of any reserve for bad debts related to the receivable.

3 Installment obligations and recapture provisions.--State whether the Distributor will distribute to the shareholders in liquidation any installment obligations (section 453(d) of the Code) 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.

05. Solvency.--Indicate that the Distributor will be solvent to the extent that there will be a distribution of assets to the shareholders of the Distributor in redemption and cancellation of their stock within the meaning of Rev. Rul. 56-387, 1956-2 C.B. 189, as modified by Rev. Rul. 73-264, 1973-1 C.B. 178.

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.