Rev. Proc. 2014-3 provides that the IRS won’t issue rulings on “the treatment or effects of hook equity, including as a result of its issuance, ownership, or redemption.” It defines hook equity as “an ownership interest in a business entity (such as stock in a corporation) that is held by another business entity in which at least 50 percent of the interests (by vote or value) in such latter entity are held directly or indirectly by the former entity.” But a recent ruling involved hook stock and predated the no-rule. LTR 201404002 involved a surprising but somewhat common use of Section 355 to eliminate hook stock. It requires the invention of yet another spinoff term—this time, the split-down.
The advisory is provided on the Alston & Bird website: www.alston.com/advisories/fed-tax-july-2014/