REIT Mergers and Reorganizations

IRS Private Letter Ruling 201214020

Facts
In a letter ruling dated April 14, 2009 (PLR-143744-08) (the “Prior Letter Ruling”), we ruled on the federal income tax consequences of a proposed distribution of the stock of Controlled by Distributing (the “Distribution”) and a proposed merger of Controlled into MergeCo with MergeCo surviving (the “Merger”).  Prior to Year 1, MergeCo elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. 


Following the Merger, MergeCo changed its name to Corporation X and continued to operate as a REIT.  Corporation X operated as a REIT until Year 2.  During Year 2, Corporation X failed to qualify as a REIT.  Corporation X’s REIT status was effectively revoked retroactively for all of Corporation X’s Year 2 taxable year. 


Rulings
Based solely on the information submitted and the representations made, we rule as follows:
Following the Distribution, Controlled will not be considered a successor to Distributing for purposes of section 1504(a)(3).  As a result, beginning in Year 2, Corporation X and its subsidiaries that are “includible corporations” under section 1504(b) and satisfy the ownership requirements of section 1504(a)(2), may elect to file a consolidated federal income tax return with Corporation X as the common parent.

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