New IRS policy on tax-free corporate divisions.

Stuart R. Josephs, CPA, of the San Diego-based Tax Assistance Practice, reports that: Rev. Proc. 2003-48 (IRB 2003-29, 7/21/03) announced a plan to provide more published guidance and fewer private letter rulings (PLRs) under Sec. 355. regarding spin-offs, split-ups and split-offs.

PLRs will not be issued on these requirements for tax treatment of distributions of stock or securities of controlled corporations:

* Whether the distribution has a substantial corporate business purpose;

* Whether the distribution is a device for distributing earnings and profits of the distributing or controlled corporation; and

* Whether, under Sec. 355(e), the distribution is part of a plan (or series of related transactions) in which one or more persons will acquire a 50 percent or greater interest in the distributing or controlled corporation.

This is a pilot program that is effective for ruling requests postmarked or, if not mailed, received after Aug. 8, 2003. The pilot program is intended to operate for at least one year.

Under Rev. Rul. 2003-74 (IRB 2003-29, 7/21/03), a distribution of stock of a controlled corporation by a distributing corporation to enable each corporation's management to concentrate on its own business satisfies the business purpose requirement.

Under Rev. Rul 2003-75 (IRB 2003-29, 7/21/03), a distribution of stock of a controlled corporation to resolve a capital allocation problem between the distributing and controlled corporations satisfies the business purpose requirement.