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ARTICLE · 18 NOVEMBER 2015

Investment Assets In Corporate Separations

Fox Rothschild LLP
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The recently issued Notice 2015-59 expresses significant concerns with the application of section 355 to certain corporate separations, including transactions that result in distributing corporation (distributing) or distributed corporation (controlled) having large amounts of investment assets.

United StatesWealth Management
Stanley Barsky
Stanley Barsky
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Originally published in Tax Notes, November 2, 2015,

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The recently issued Notice 2015-59 expresses significant concerns with the application of section 355 to certain corporate separations, including transactions that result in distributing corporation (distributing) or distributed corporation (controlled) having large amounts of investment assets. The notice suggests that those transactions may run afoul of section 355 and circumvent the purposes of General Utilities repeal.

This article focuses on corporate separations that result in Distributing or Controlled owning a substantial amount of investment assets, for example, in relation to the value of their assets and the gross assets of the trades or businesses used to satisfy the section 355 (b) active conduct of a trade or business requirement. While the IRS's concern with investment assets is understandable, corporate separations are incredibly complicated transactions, and the

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