Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 69-16

1969-1 C.B. 103

Sec. 367

IRS Headnote

Section 367 of the Code does not apply to the deemed incorporation of a domestic corporation affected by Nigerian "Decree No. 51"; before property is transferred pursuant to a formal incorporation an advance ruling is required under section 367.

Full Text

Rev. Rul. 69-16

Advice has been requested regarding the application of section 367 of the Internal Revenue Code of 1954 to domestic corporations affected by "Decree No. 51--Companies Decree 1968" issued by the Federal Military Government of the Federal Republic of Nigeria on October 16, 1968.

Part X of Decree No. 51 provides, in pertinent part, that every foreign company shall, in respect of its operation in Nigeria, be deemed to have become incorporated in Nigeria as a separate entity as of November 18, 1968. This deemed incorporation in the case of a company intending to continue operations in Nigeria, must be followed by a formal incorporation as a Nigerian corporation.

Section 367 of the Code provides that, in determining the extent to which gain will be recognized in the case of any of the exchanges described in sections 332, 351, 354, 355, 356, or 361 of the Code, a foreign corporation will not be considered as a corporation unless, before such exchange, it has been established to the satisfaction of the Secretary or his delegate that such exchange is not in pursuance of a plan having as one of its principal purposes the avoidance of Federal income taxes.

For United States Federal income tax purposes, the deemed incorporation as of November 18, 1968, under Decree No. 51 is not considered to be a transfer of property by a domestic corporation to a foreign entity. Accordingly, it is held that section 367 of the Code does not apply to the deemed incorporation.

However, before there is a transfer of property by a domestic corporation to a Nigerian corporation, so that the corporation may continue operations in Nigeria, an advance ruling under section 367 of the Code is required in order for the provisions of sections 351, 354, 355, 356, or 361 of the Code to apply. For guidelines regarding requests for an advance ruling under section 367 of the Code, see Revenue Procedure 68-23, C.B. 1968-1, 821.