IRS written determination 201528034

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201528034
Release Date: 7/10/2015
Index Number: 9100.00-00, 263.00-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
--------------------------, ID No. ------------
Telephone Number:
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Refer Reply To:
CC:ITA:B01
PLR-144311-14
Date:
March 31, 2015
Taxpayer= -------------------------------------------------------
Taxable Year= ------
X= -----------------------------------------------------------------------------------------
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Y
Acquirer
=
=
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Merger Sub= -------------------------
Date= --------------------------
Firm= ------------------------------------
Advisor= ------------
Dear --------------:
This letter responds to your letter dated December 3, 2014, submitted on behalf of
Taxpayer requesting an extension of time under §§301.9100-1 and 301.9100-3 of the
Procedure and Administration Regulations to make the election described in Section 4
of Rev. Proc. 2011-29, 2011-18 I.R.B. 746, which includes attaching statements to
Taxpayer’s original federal income tax return for Taxable Year.
FACTS
Taxpayer is the wholly-owned subsidiary of Acquirer, the common parent of a
consolidated group engaged in the business of X. Taxpayer is engaged in the business
of Y and uses the cash method of accounting.
On Date, Acquirer acquired 100% of the stock of Taxpayer through the merger of
Merger Sub with and into Taxpayer, with Taxpayer surviving as a wholly-owned

PLR-144311-14
2
subsidiary of Acquirer. The separate corporate existence of Merger Sub ceased, and
Taxpayer continued thereafter as the surviving entity of the merger as a wholly-owned
subsidiary of Acquirer. For federal income tax purposes, Taxpayer treated the
transaction as a taxable stock acquisition under § 1001 of the Internal Revenue Code in
which Acquirer obtained a § 1012 cost basis in the acquired stock. The Taxpayer
disregarded the existence of Merger Sub and its merger into Taxpayer and treated the
acquisition as if Acquirer purchased Taxpayer stock directly in a taxable acquisition.
See, e.g., Rev. Rul. 90-95, 1990-2 C.B. 67. In connection with this acquisition,
Taxpayer incurred success-based fees payable to Firm, its financial banking investment
advisor.
On Taxpayer’s original federal income tax return for Taxable Year prepared by Advisor,
Taxpayer properly attached the mandatory statements as required by Section 4.01 of
Revenue Procedure 2011-29, stating that it elected the safe harbor for success-based
fees, identifying the transaction, and setting forth the success-based fee amounts that
are deducted and capitalized. However, in reliance on Advisor, Taxpayer did not
properly reflect the amount of success-based fees incurred.
LAW
Section 263(a)(1) of the Internal Revenue Code and § 1.263(a)-2(a) of the Income Tax
Regulations provide that no deduction shall be allowed for any amount paidout for
property having a useful life substantially beyond the taxable year. In the case of an
acquisition or reorganization of a business entity, costs that are incurred in the process
of acquisition and that produce significant long-term benefits must be capitalized.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 89-90, 112 S. Ct. 1039, 117 L. Ed. 2d
226 (1992); Woodward v. Commissioner, 397 U.S. 572, 575-576, 90 S. Ct. 1302, 25 L.
Ed. 2d 577 (1970).
Under § 1.263(a)-5, a taxpayer must capitalize an amount paid to facilitate the business
acquisition or reorganization transactions described in § 1.263(a)-5(a). In general, an
amount is paid to facilitate a transaction described in § 1.263(a)-5(a) if the amount is
paid in the process of investigating or otherwise pursuing the transaction. Whether an
amount is paid in the process of investigating or otherwise pursuing the transaction is
determined based on all of the facts and circumstances. See § 1.263(a)-5(b)(1).
Section 1.263(a)-5(f) provides that an amount paid that is contingent on the successful
closing of a transaction described in §1.263(a)-(5)(a) (i.e., a success-based fee) is
presumed to facilitate the transaction. A taxpayer may rebut this presumption by
maintaining sufficient documentation to establish that a portion of the fee is allocable to
activities that do not facilitate the transaction.
Section 4.01 of Rev. Proc. 2011-29 provides a safe harbor election for taxpayers that
pay or incur success-based fees for services performed in the process of investigating

PLR-144311-14
3
or otherwise pursuing a covered transaction described in §1.263(a)-5(e)(3). In lieu of
maintaining the documentation required by §1.263(a)-5(f), a taxpayer may elect to
allocate a success-based fee between activities that facilitate the transaction and
activities that do not facilitate the transaction and by treating 70 percent of the amount
of the success-based fee as an amount that does not facilitate the transaction and by
capitalizing the remaining 30 percent as an amount that does facilitate the transaction.
In addition, the taxpayer must attach a statement to its original federal income tax return
for the taxable year the success-based fee is paid or incurred, stating that the taxpayer
is electing the safe harbor, identifying the transaction, and stating the success-based
fee amounts that are deducted and capitalized.
Section 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3
to make certain regulatory elections. Section 301.9100-1(b) defines a “regulatory
election” as an election whose due date is prescribed by a regulation published in the
Federal Register, or a revenue ruling, revenue procedure, notice or announcement
published in the Internal Revenue Bulletin.
Sections 301.9100-1 through 301.9100-3 provide the standards the Commissioner will
use to determine whether to grant an extension of time to make an election. Section
301.9100-2 provides automatic extensions of time for making certain elections. Section
301.9100-3 provides extensions of time for making elections that do not meet the
requirements of § 301.9100-2.
Section 301.9100-3(a) provides that requests for relief under § 301.9100-3 will be
granted when the taxpayer provides evidence to establish to the satisfaction of the
Commissioner that the taxpayer acted reasonably and in good faith and that granting
relief will not prejudice the interests of the government. See also § 301.9100-3(b) and
(c).
CONCLUSION
Based solely on the facts and representations submitted, we conclude that Taxpayer
acted reasonably and in good faith, and granting relief will not prejudice the interests of
the government. Accordingly, the requirements of §§ 301.9100-1 and 301.9100-3 have
been met.
Taxpayer is granted an extension of 45 days from the date of this ruling to file an
amended return to properly capitalize and deduct success-based fees related to the
acquisition consistent with the election made under Revenue Procedure 2011-29.
Taxpayer also has 45 days from the date of this ruling to file amended mandatory
statements as required by Section 4.01 of Revenue Procedure 2011-29, stating that it is
electing the safe harbor for success-based fees, identifying the transaction, and stating
the success-based fee amounts that are deducted and capitalized.

PLR-144311-14
4
The rulings contained in this letter are based upon information and representations
submitted by Taxpayer and accompanied by a penalty of perjury statement executed by
an appropriate party. While this office has not verified any of the material submitted in
support of the request for rulings, it is subject to verification on examination.
Except as expressly provided herein, no opinion is expressed or implied concerningthe
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter, including whether Taxpayer properly included the correct costs as success-
based fees subject to the retroactive election, or whether Taxpayer’s transactions were
within the scope of Rev. Proc. 2011-29.
This ruling does not express or imply any opinion whether Taxpayer’s acquisition is
within the scope of Rev. Rul. 90-95. Moreover, this ruling does not express or imply any
opinion concerning whether Taxpayer appropriately reported on Acquirer’s consolidated
return for Taxable Year the success-based fees that Taxpayer incurred, as opposed to
Taxpayer reporting those success-based fees on its return for the short taxable year
ending at the close of Date.
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
A copy of this ruling should be attached to Taxpayer’s federal tax returns for the tax
years affected. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.
In accordance with the provisions of the power of attorney currently on file with this
office, a copy of this letter is being sent to your authorized representative.
Sincerely,
Lewis K Brickates
Chief, Branch 1
Office of Associate Chief Counsel
(Income Tax & Accounting)
cc: