Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 69-32

1969-1 C.B. 100

Sec. 341

IRS Headnote

Time and manner for corporations to consent to the provisions of section 341(f)(2) of the Code, regarding dispositions of certain assets, to avoid application of the collapsible corporation provisions of section 341(a).

Full Text

Rev. Rul. 69-32 /1/

Advice has been requested regarding the consent of a corporation to the provisions of section 341(f) of the Internal Revenue Code of 1954 dealing with collapsible corporations.

Section 341(a)(1) of the Code characterizes gain from the sale or exchange of stock in a collapsible corporation that is held for more than six months as gain from the sale or exchange of property which is not a capital asset. Section 341(f)(1) of the Code provides, in general, that section 341(a)(1) of the Code will not apply to a sale of stock of a corporation if the corporation consents, pursuant to section 341(f)(2) of the Code, to recognize gain on any future disposition by it of its "subsection (f) assets" (defined, generally, as assets of the corporation, other than capital assets, owned or held under option on the date the stock of the corporation is sold), and if the sale of stock is made within the six-month period beginning with the date on which the consent is filed. Section 341(f)(6) of the Code provides that if the corporation owns five percent or more in value of the outstanding stock of another corporation or corporations, then in addition to the consent that is required by the owning corporation, each of the other corporations must also consent to recognize gain on the disposition by it of its "subsection (f) assets." Section 341(f)(6) of the Code further provides that in the case of a chain of corporations connected by five percent stock ownership, each corporation in that portion of the chain below the corporation the stock of which is sold must also consent to this special tax treatment within the six-month period ending on the date the stock is sold.

For purposes of sections 341(f)(1) and (6) of the Code the consent of a corporation should be given by means of a statement, signed by any officer who is duly authorized to act on behalf of the consenting corporation, stating that the corporation consents to have the provisions of section 341(f)(2) of the Code apply. The statement should contain the names, addresses, and taxpayer account numbers of any corporations five percent or more in value of the stock of which is owned directly by the consenting corporation, and any other corporations connected to the consenting corporation through a chain of stock ownership described in section 341(f)(6) of the Code.

The statement should be filed with the district director having jurisdiction over the income tax return of the consenting corporation for the taxable year during which the statement is filed. A shareholder who sells stock in a consenting corporation within the six-month period beginning with the date on which the consent is filed should attach a copy of the consent to his income tax return for the taxable year in which the sale is made.

Each corporation that consents to the application of section 341(f)(2) of the Code must maintain records adequate to permit specific identification of its "subsection (f) assets."

/1/ Based on Technical Information Release 621, dated August 31, 1964.