SERVICE TO RULE ON REORGANIZATION 'CONTROL REQUIREMENTS'

Rev. Proc. 86-44

SECTION 1. BACKGROUND

Rev. Proc. 86-3, 1986-1 C.B. 416, lists areas in which rulings or determination letters will not be issued by the Internal Revenue Service. Section 5 of Rev. Proc. 86-3 is entitled Areas Under Extensive Study in Which Rulings or Determination Letters Will Not be Issued Until the Service Resolves the Issues Through Publication of a Revenue Ruling, Revenue Procedure, Regulations or Otherwise.

Section 5.19 provides: Section 368.--Definitions Relating to Corporate Reorganizations.--Whether a transaction qualifies under either section 368(a)(1)(B) or section 351(a) of the Code by reason of Rev. Rul. 67-448, 1967-2 C.B. 144, when the same transaction is structured under section 368(a)(1)(A) and 368(a)(2)(E) (as a reverse triangular merger) and fails to qualify for an advance ruling under those sections merely because (i), the "substantially all" requirement set forth in section 3.01 of Rev. Proc. 77-37, 1977-2 C.B. 568, is not met, or (ii), the "control" requirement of section 3689(a)(2)(E)(ii) is not met where the step transaction doctrine may be applies to treat a prior redemption of stock as part of the plan of reorganization.

SEC. 2. PROCEDURE

01 Rev. Proc. 86-3 is amended by deleting clause (ii) from subsection .19 of section 5. The remainder of subsection .19 of section 5 is to remain, except that the designation "(i)" is deleted.

02 The amended section 5.19 reads as follows:

Section 368.--Definition Relating to Corporate Reorganizations.--Whether a transaction qualifies under either section 368(a)(1)(B) or section 351(a) of the Code by reason of Rev. Rul. 67-448, 1967-2 C.B. 144, when the same transaction is structured under sections 368(a)(1)(A) and 368(a)(2)(E) (as a reverse triangular merger) and fails to qualify for an advance ruling under those sections merely because the "substantially all" requirement" set forth in section 3.01 of Rev. Proc. 77-37, 1977-2 C.B. 568, is not met.

SEC. 3. EFFECTIVE DATE

This revenue procedure is effective for ruling requests on hand in the National Office on December 8, 1986, the date of publication of this ruling in the Internal Revenue Bulletin, and for all requests received thereafter.

SEC. 4. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 86-3 is modified.