IRS Issues PLR Concluding Tax-Free Reorganization for LLC Conversion, Stock Distribution

The IRS has issued a private letter ruling on I.R.C. §§355 and 368 and Treas. Regs. §§1.355 and 1.312 addressing corporate reorganization tax treatment where a corporation converts a disregarded LLC subsidiary to corporate status and distributes the new corporation’s stock to certain shareholders in exchange for their distributing corporation stock, confirming the transaction qualifies as a tax-free reorganization with no gain or loss recognition to the parties, carryover basis treatment for transferred assets, and earnings and profits allocation between the entities. [PLR 202622007]

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