IRS Rules On Determining Voting Power Related To Section 355

The IRS has ruled in PLR 2015-05-007 that the voting power of stock within the meaning of Section 355(d) was determined by reference to the ability to elect members of the corporation's board of directors.

The private letter ruling addressed a corporation (Distributing) with two classes of common stock issued and outstanding, Class A and Class B. The Class A stock was high-vote stock (regarding the election of directors) and was convertible into Class B stock. The Class B was low-vote stock and was entitled to an annual dividend preference over the Class A stock. If the outstanding Class A stock fell below a certain amount, every class of the Distributing stock would automatically be entitled to the same voting rights (stock unification).