Transactions effected under U.S. Treasury programs that are designed to preserve or enhance the viability of financial institutions can sometimes raise difficult tax issues. A recent private letter ruling, discussed below,1 describes a situation in which the IRS ruled favorably on certain issues that have been of concern in other contexts, and that could otherwise have detracted significantly from the attractiveness of a transaction intended to preserve the viability of a financial institution.
Facts in PLR 200932004
The taxpayer requesting the rulings was apparently a financial institution and the common parent corporation of a group which joined in the filing of a consolidated federal income tax return. The group included the “Companies,” which owned undivided interests in the “Assets.” The Assets, which were acquired through participation in a securities lending operation that was managed by an affiliate of the Companies, had declined in value from the price for which they were acquired, but are not otherwise described in the ruling.
