In PLR 201435003, the IRS addressed a reorganization in which some members of a consolidated group (including the common parent) were under Chapter 11 bankruptcy protection and some members were not.
Pursuant to the plan of reorganization, a transitory merger subsidiary of the parent merged with, and into, an unrelated target corporation in a tax-free reorganization, wherein the target shareholders received stock in the reorganized parent. Certain creditors of the group also received common stock in the reorganized parent.
The letter ruling states that all members of the group are aggregated for purposes of determining whether Section 382(l)(5) or 382(l)(6) applies to the ownership change. If Section 382(l)(6) applies (or is elected into), the ruling further states that the asset value test under Treas. Reg. Sec. 1.382-9(j) is determined by treating the stock interest owned directly by the parent as the asset and not the inside assets of each member.
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