SERVICE WILL FOCUS MORE CLOSELY ON APPLICATIONS FOR SECTION 306(b)(4) RELIEF.

Rev. Proc. 89-30

SECTION 1. PURPOSE

This revenue procedure revokes section 5 of Rev. Proc. 77-37, 1977-2 C.B. 568, superseded in part by Rev. Proc. 79-14, 1979-1 C.B. 496, and amplified by Rev. Proc. 77-41, 1977-2 C.B. 574, Rev. Proc. 82-23, 1982-1 C.B. 474, Rev. Proc. 83-81, 1983-2 C.B. 598 Rev. Proc. 84-42, 1984-1 C.B. 521, and Rev. Proc. 86-42, 1986-2 C.B. 722. Rev. Proc. 77-37 contains operating rules for the issuance of advance rulings as to matters within the jurisdiction of the Corporation Tax Division of the Internal Revenue Service.

SEC. 2. BACKGROUND

01 Section 306(a) of the Internal Revenue Code concerns the treatment of the amount realized on the disposition or redemption of section 306 stock, as defined in section 306(c). Section 306(b)(4) provides in part that section 306(a) shall not apply if it is established to the satisfaction of the Secretary that the distribution and the disposition or redemption of the section 306 stock was not in pursuance of a plan having as one of its principle purposes the avoidance of federal income tax.

02 See Rev. Rul. 89-63, page 41, this Bulletin, for a clarification of the application of section 306(b)(4).

SEC. 3. PROCEDURE

Section 5 of Rev. Proc. 77-37 provides the usual requirements for obtaining a favorable ruling under section 306(b)(4) of the Code. The proper scope and function of section 306(b)(4) has been under extensive study and it has been determined that the requirements listed in section 5 do not adequately identify those cases which warrant the relief provided by section 306(b)(4). Therefore, section 5 is hereby revoked. The Service will continue to consider requests for rulings concerning the application of section 306(b)(4) pending completion of its study.

SEC. 4. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 77-37 is modified.

SEC. 5. EFFECTIVE DATE

The modification of Rev. Proc. 77-37 is effective May 1, 1989, the date of publication of this revenue procedure.

DRAFTING INFORMATION

The principal author of this revenue ruling is David Madden of the Office of Assistant Chief Counsel (Corporate). For further information regarding this revenue ruling, contact David Madden on (202) 566-3205 (not a toll-free call).