IRS Supplements Prior Spinoff Ruling Following Taxpayer Delay

In a private letter ruling (PLR 201505013), the IRS supplemented its previous ruling in PLR 201437013 and addressed issues related to a delay in the expected consummation of a spinoff. In the facts of the original ruling, the controlled corporation (Controlled) undertook a public offering of a portion of its shares. After the offering, the distributing corporation (Distributing) retained ownership of enough stock in Controlled to constitute "control" and to enable Distributing to engage in a tax-free spinoff of Controlled.

In relevant facts to the supplemental ruling, Distributing's plan to distribute its stock of Controlled was delayed. It appears that the request for the supplemental ruling occurred in part because the anticipated exercise of certain stock options of Controlled would cause Distributing's interest in Controlled to drop below the 80% threshold necessary to maintain "control" for the anticipated spinoff. To resolve this problem, Distributing acquired