Rev. Proc. 70-23

Section 1. Background and Purpose.

.01 Section 4.01 of Revenue Procedure 65-17, C.B. 1965-1, 833, as amplified by Revenue Procedure 65-31, C.B. 1965-2, 1024, and as amended by Revenue Procedure 65-17, Amendment I, C.B. 1966-2, 1211, provides that if a qualified taxpayer who meets certain requirements receives a dividend from the corporation with which it engages in the transaction or arrangement giving rise to the section 482 allocation, it may exclude the dividend up to the amount of the allocation, less the amount of any offset which is allowed to the taxpayer under section 3 of Revenue Procedure 64-54, C.B. 1964-2, 1008, as amplified by Revenue Procedure 65-31, C.B. 1965-2, 1024, and as amended by Revenue Procedure 66-33, C.B. 1966-2, 1231, from its gross income, if it had been included in gross income as a dividend for the year for which the allocation was made.

.02 Requests have been received for amplification of the dividend exclusion provision of Revenue Procedure 65-17. This Revenue Procedure provides such amplification. It also clarifies Revenue Procedure 65-17 in cases where any offset is allowed under Revenue Procedure 69-13, C.B. 1969-1, 402.

Sec. 2. Adjustments To Be Made or Allowed.

.01 Dividends may be excluded from gross income where the domestic taxpayer receiving the dividends, while not the taxpayer to which the section 482 allocation has been made, controls directly or indirectly at least 80 percent of the voting power of the corporation to which the section 482 allocation is made. Dividends may be excluded from gross income where the domestic taxpayer receiving the dividends, while not the taxpayer to which the section 482 allocation has been made is controlled (80 percent or more of the voting power) directly or indirectly by the corporation whose income was increased as a result of the section 482 allocation. Such exclusions are subject to the limitations set forth in section 4.01 of the Revenue Procedure 65-17. However, for purposes of Revenue Procedure 65-17, the offset under Revenue Procedure 69-13 shall be treated the same as the offset under Revenue Procedure 64-54.

.02 In order for the relief herein described to be granted, the accounts of the corporations effected must be adjusted to reflect what the accounts would have shown had the transactions been consummated originally in accordance with the section 482 allocation.

Sec. 3. Effect on Other Documents

Revenue Procedure 65-17, as amplified and amended, is further amplified, and is clarified to include cases where any offset under Revenue Procedure 69-13 is allowed.