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Section 6109.-Identifying Numbers
26 CFR 301.6109-1: Identifying numbers.
(Also: sections 368, 1361, 1362; 1.1361-4, 1.1361-5.)
S corporation; qualified subchapter S subsidiary (QSub). This ruling describes situations where an S corporation undergoes a reorganization pursuant to section 368(a)(1)(F) of the Code where the operating S corporation becomes a QSub of a newly formed holding company. The ruling holds that the newly formed parent does not have to make a new S election pursuant to Rev. Rul. 64-250. The ruling further holds that, effective 1/1/09, the new parent will have to get its own EIN rather than take over the QSub's EIN. However, for S corporations that have previously reorganized under section 368(a)(1)(F) in a manner described in this ruling, where the parent took the QSub's EIN, the parent should continue to use that EIN and the QSub will have to get a new EIN when it is treated as a separate corporation. Rev. Rul. 64-250 amplified.
ISSUE
In the transactions described in Situations 1 and 2 below, does an S corporation election under § 1362(a) of the Internal Revenue Code (the Code) terminate and what are the proper employer identification numbers (EINs) for the entities participating in the transactions?
FACTS
Situation 1. B, an individual, owns all of the stock in Y, an S corporation. Fs EIN is 22-2222222. In Year I, B forms Newco and contributes all of the Y stock to Newco. Newco meets the requirements for qualification as a small business corporation and timely elects to treat y as a qualified subchapter S subsidiary (QSub), effective immediately following the transaction. The transaction meets the requirements of a reorganization under § 368(a)(1)(F). In Year 2, Newco sells a 1% interest in Y to D.
Situation 2. C, an individual owns all of the stock of Z, an S corporation. Z's EIN is 33-3333333. In Year i, Z forms Newco, which in turn forms Mergeco. Pursuant to a plan of reorganization, Mergeco merges with and into Z, with Z surviving and C receiving solely Newco stock in exchange for Z stock. Newco meets the requirements for qualification as a small business corporation and timely elects to treat Z as a QSUB, effective immediately following the transaction. The transaction meets the requirements of a reorganization...