On March 21, 2019, the IRS announced it is temporarily suspending two revenue rulings addressing tax-free spinoffs. The suspended rulings had arguably required the distributing corporation and the spun-off corporation to each independently generate current revenue. This development is welcome news for life sciences, technology, and other research and development (R&D)-focused business organizations that did not pursue a tax-free spinoff because of a perceived revenue requirement. The move comes on the heels of the IRS’s September 2018 announcement that it is prepared to issue favorable rulings on the tax-free treatment of corporate spinoffs by research-intensive business ventures that do not currently collect income, while the IRS studies the issue.
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