Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 69-33

1969-1 C.B. 100

Sec. 341

IRS Headnote

Actions to be taken by transferee corporations to comply with requirements of section 341(f)(3)(B) of the Code, regarding dispositions of certain assets, to avoid application of the collapsible corporation provisions of section 341(a).

Full Text

Rev. Rul. 69-33 /1/

Advice has been requested relative to the requirements of section 341(f)(3)(B) of the Internal Revenue Code of 1954 with regard to an agreement from a transferee corporation.

Section 341(f)(1) of the Code provides in general that a gain from the sale of stock of a corporation will not be subject to the provisions of section 341(a)(1) of the Code, pertaining to collapsible corporations, if the corporation consents to have the provisions of section 341(f)(2) of the Code apply and if the sale of the stock is made within a six-month period beginning with the date on which the consent is filed. (See Rev. Rul. 69-32, this page, regarding the filing of the consent.) Section 341(f)(2) of the Code provides, in general, that if "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) owned by the corporation at the date of such sale of the stock of such corporation are subsequently disposed of by such corporation, such corporation will recognize any gain upon the disposition notwithstanding any other provisions of Subtitle A of the Code. Section 341(f)(3) of the Code provides that if the basis of a "subsection (f) asset" in the hands of a transferee is determined by reference to its basis in the hands of the transferor by reason of the application of section 332, 351, 361, 371(a), or 374(a) of the Code then the amount of gain taken into account by the transferor under section 341(f)(2) of the Code shall not exceed the amount of gain recognized to the transferor on the transfer of such asset (determined without regard to section 341(f) of the Code). However, section 341(f)(3)(B) of the Code provides that section 341(f) of the Code will only apply if the transferee agrees to have the provisions of section 341(f)(2) of the Code apply to any disposition by it of a "subsection (f) asset."

To satisfy the requirements of section 341(f)(3)(B) of the Code the actions set forth below should be taken.

(1) The agreement of the transferee corporation should be filed before the transfer to it of the "subsection (f) assets."

(2) The agreement should be filed with the district director having jurisdiction over the income tax return of the transferee for the taxable year during which the transfer of "subsection (f) assets" is to be made, and should be signed by any officer who is duly authorized to act on behalf of the transferee corporation. In the event that the transaction is one to which section 371(a) or 374(a) of the Code (dealing with reorganizations in certain receivership and bankruptcy proceedings) applies, the fiduciary for the transferee corporation, in appropriate cases, may sign the agreement.

(3) The agreement should state that the transferee corporation agrees to have the provisions of section 341(f)(2) of the Code apply to any disposition by it of the "subsection (f) assets" received, and it shall apply to all the "subsection (f) assets" transferred pursuant to the applicable transaction described in section 341(f)(3) of the Code.

(4) The agreement should identify the transaction by which the transferee will acquire the "subsection (f) assets," including the names, addresses, and the taxpayer identification account numbers of the transferor and transferee corporations, and it should also include a schedule of the "subsection (f) assets" to be transferred.

The transferor should attach a copy of the agreement to its income tax return for the taxable year in which the "subsection (f) assets" are transferred. Further, an agreeing transferee corporation under section 341(f)(3) of the Code must maintain records adequate to permit specific identification of its "subsection (f) assets" subject to the agreement.

/1/ Based on Technical Information Release 884, dated Feb. 16, 1967.