Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 75-95

1975-1 C.B. 114

Sec. 368

IRS Headnote

Reorganization; continuity of interest; voting trust stock. Two stockholders, each owning 50 percent of the stock of a corporation, who established a voting trust and transferred all of their corporate stock to the trust in exchange for an equal amount of voting trust certificates will be considered the owners of the stock for purposes of determining whether the continuity of interest requirement of section 1.368-1 of the regulations is met.

Full Text

Rev. Rul. 75-95

Corporation X had two stockholders, A, and B, each of whom owned 50 percent of its stock. A and B established a voting trust, appointed an unrelated voting trustee, and transferred all of their stock of X to the trust in exchange for an equal amount of voting trust certificates. The terms of the trust agreement state that the voting trustee has legal title to the stock and exclusive voting rights for the period of the trust. However, A and B will receive all dividends paid by X. Upon termination of the trust, the shares of X will be returned to A and B.

Held, for purposes of determining whether the continuity of interest requirement of section 1.368-1(b) of the Income Tax Regulations is met, in transactions under section 368(a)(1) of the Code, A and B will be considered as the owners of the stock of X. See Rev. Rul. 71-262, 1971-1 C.B. 110, which holds that the holder of a voting trust certificate is the owner of the shares of stock held by a voting trust and is the redeemed shareholder for purposes of section 302. See also Helvering v. Minnesota Tea Co., 296 U.S. 378 (1935), XV-1 C.B. 189 (1936), where voting trust certificates received by one corporation as consideration for the transfer by it of property to another corporation were held to represent a definite and substantial interest in the acquiring corporation for purposes of qualifying the transaction as a reorganization under the Revenue Act of 1928.