IRS and Treasury Update Guidelines for Spin‑Off Private Letter Rulings, Narrowing IRS Practice

On May 6, 2024, Cravath prepared a memo for its clients entitled “IRS and Treasury Update Guidelines for Spin‑Off Private Letter Rulings, Narrowing IRS Practice.” The memo examines the Internal Revenue Service’s recently released Rev. Proc. 2024‑24 and Notice 2024‑38, which provide updated guidelines for taxpayers requesting private letter rulings from the IRS for tax‑free spin‑off and split‑off transactions under Section 355. The memo outlines the key changes in the IRS’s ruling practice for spin-offs, which reflect a significant narrowing of the current ruling practice, that are related to debt‑for‑equity exchange structuring, the use of proceeds in “boot purges,” contingent liabilities and retentions of Spinco stock.

Please click here to read the memo.