Rev. Proc. 2002-67

VII. EFFECTIVE DATE RULES
Regulations to be issued under section
954(i) concerning the issues addressed in
this notice will be effective for taxable years
beginning on or after the date such regulations are published as final in the Federal Register. Until such regulations are
issued, controlling shareholders of a QIC
may rely on this notice to determine the interest rates and appropriate foreign loss payment patterns of a QIC for purposes of
section 954(i). Controlling U.S. shareholders also may apply the guidance in this notice to prior taxable years.
VIII. PAPERWORK REDUCTION ACT
The collections of information contained
in the notice have been reviewed and approved by the Office of Management and
Budget for review in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507)
under control number 1545–1799.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless
the collection of information displays a valid
OMB control number.
The collections of information in this notice are in section V headed Applicable Loss
Payment Patterns. This information is required by the IRS to determine whether a
QIC is allowed to determine its income by
using its own payment pattern data for a
particular line of business. The information will be used on examination to determine whether a QIC is calculating its
foreign loss payment patterns correctly. The
likely respondents are U.S. shareholders that
own foreign insurance companies.
The estimated total annual reporting burden is 300 hours.
The estimated average annual burden per
respondent is 1 hour.
The estimated number of respondents is
300.
The estimated annual frequency of responses is once.
Books or records relating to a collection of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required by
26 U.S.C. 6103.

2002–43 I.R.B.

IX. REQUEST FOR COMMENTS AND
DRAFTING INFORMATION
The IRS and Treasury request comments
on the rules described in this notice and on
the additional issues, if any, that should be
addressed when regulations under section
954(i) are issued. Written comments may
be submitted to the Associate Chief Counsel (International), Attention: Steven Jensen
(Notice 2002–69), Room 4562, CC:INTL:
Br5, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington DC
20224. Alternatively, taxpayers may submit comments directly to the IRS Internet
site at http://www.irs.ustreas.gov/prod/
tax_regs/comments.html. Comments will be
available for public inspection and copying. Treasury and the IRS request comments by March 28, 2003. For further
information regarding this notice, contact
Steven Jensen of the Office of Associate
Chief Counsel (International) at 202–622–
3870 (not a toll-free call).

the aggregate, by the Taxpayer or an entity that was a member of the Taxpayer’s
consolidated group (including any successor to such group) at any time. Any ambiguity in this revenue procedure should be
resolved in favor of achieving this purpose.
.04 Both resolution methodologies are
also designed to provide flexibility to accommodate a large variety of views on the
relative merits of the case. The Arbitration Procedure is intended to require each
party to realistically assess the merits of the
case and achieve a resolution in the event
of irreconcilable differences before a neutral expert who must choose between the
divergent settlement proposals without
modification. Maximum flexibility, within
the stated range of concession, is provided
for the negotiations. This resolution should
provide strong incentives to resolve disputes with quick, competent review and certainty of repose at a reduced cost for both
parties.
SECTION 2. BACKGROUND

Rev. Proc. 2002–67
Settlement of Section 351
Contingent Liability Tax Shelter
Cases
SECTION 1. PURPOSE
.01 This revenue procedure prescribes
procedures for Taxpayers who elect to participate in a settlement initiative aimed at
resolving cases involving Contingent Liability Transactions that are the same as or
substantially similar to those described in
Notice 2001–17, 2001–1 C.B. 730 (“Contingent Liability Transactions”).
.02 This revenue procedure provides for
two resolution methodologies. The first option is a Fixed Concession Procedure set
forth in Section 5. The second option is a
Fast Track Dispute Resolution Procedure —
Contingent Liability Cases set forth in Section 6; this second method includes the
Binding Arbitration Procedure set forth in
Section 7. The basic eligibility requirements for both options are set forth in Section 3. Additional eligibility requirements
for the Fixed Concession Procedure are set
forth in Section 5.01.
.03 Both resolution methodologies are
designed to ensure that any tax benefits associated with the Contingent Liability Transactions are claimed no more than once, in

733

.01 The transactions in question generally involve a transfer that purportedly complies with section 351 of the Internal
Revenue Code of high basis, high value assets from a transferor corporation (“Taxpayer”) to a transferee corporation controlled
by the transferor. The assets are transferred
in exchange for stock of the transferee corporation and the transferee’s assumption of
a liability of the transferor, which has not
yet been taken into account for tax purposes. The Taxpayer takes the position that
the basis of the stock of the transferee corporation received by the transferor is equal
to the bases in the assets transferred, without a reduction in basis for the liability assumed. The transferor subsequently sells the
stock at a reported capital loss equivalent
to the present value of the assumed liability. When the liability ultimately is taken
into account for tax purposes, the transferee claims the tax benefits associated with
the liability.
.02 The Commissioner of the Internal
Revenue Service and Treasury have designated these transactions as “listed transactions” for purposes of Temp. Treas. Reg.
§ 1.6011–4T(b)(2) in Notice 2001–17.

October 28, 2002

SECTION 3. SCOPE
.01 Except as provided in Section 3.02,
this revenue procedure applies to any Taxpayer that has engaged in a Contingent Liability Transaction and timely elects to
resolve the issues in dispute using this procedure. In order to participate in the resolution of a Contingent Liability Transaction
under the procedures set forth in this revenue procedure, a Taxpayer must provide
a written statement under penalties of perjury that each transferor involved in the
Contingent Liability Transaction complied
with the statutory requirements specified in
the application described in Section 4.01.
In addition, this statement must include a
certification that each transferor involved
in the Contingent Liability Transaction carried out the purported section 351 exchanges and subsequent sales in accordance
with the applicable operating documents.
The scope and contents of these statements
are set forth in the application described in
Section 4.01. The Service may request further information to verify the certifications described above.
.02 Taxpayers that have engaged in a
Contingent Liability Transaction and meet
the requirements set forth below (hereinafter referred to as “Eligible Taxpayers”)
may elect to participate under this revenue procedure if:
1) The underpayment of tax attributable to the Contingent Liability Transaction is not due to fraud;
2) The contingent liability was assumed
on or before October 18, 1999;
3) The Contingent Liability Transaction is not in litigation, i.e., at any time on
or after October 4, 2002, a case containing the issue is not docketed in and under
the jurisdiction of any court, including the
Tax Court, a district court, a bankruptcy
court, the Court of Federal Claims, a circuit court of appeals, or the Supreme Court
for any year; and
4) The Contingent Liability Transaction issue has not been designated for litigation, or, if not designated for litigation,
the Taxpayer has not been notified that the
Contingent Liability Transaction issue is under consideration for designation for litigation, as of October 4, 2002. For purposes
of this revenue procedure, the Contingent
Liability Transaction issue has been designated for litigation if it has been desig-

October 28, 2002

nated under the procedures set forth in
CCDM 35.3.14 or any subsequently issued procedures for designation.
.03 A Taxpayer ineligible to participate in the resolution methodologies set
forth in the revenue procedure solely because of the restrictions set forth in Section 3.02(4), relating to issues designated
for litigation, becomes an Eligible Taxpayer upon written receipt of notification
from the Service that it will not designate
the Contingent Liability Transaction issue for litigation (or that the Service will
remove the designation in a previously designated case). After the Taxpayer becomes
an Eligible Taxpayer, the Taxpayer may apply to participate as set forth in Section 4
on or before the 90th day after the mailing date of the written notification from the
Service of the decision not to designate (or
to remove the designation of) the Contingent Liability Transaction issue. For purposes of this revenue procedure, a day
means a calendar day.
.04 Further eligibility requirements for
Taxpayers electing the Fixed Concession
Procedure are set forth in Section 5.01.
.05 Eligible Taxpayers who do not elect
to participate in one of the resolution methodologies provided for under this revenue
procedure may not take advantage of the
settlement, mediation or arbitration procedures under Notice 2001–67 (LMSB/
Appeals Fast Track Dispute Resolution
Program), 2001–2 C.B. 544; Announcement 2002–60 (Extension of Test of Arbitration Procedure for Appeals), 2002–26
I.R.B. 28; and Rev. Proc. 2002–44 (Mediation Procedure for Appeals), 2002–26
I.R.B. 10.
SECTION 4. APPLICATION PROCESS
.01 An Eligible Taxpayer who wants to
participate in one of the resolution methodologies provided under this revenue procedure must mail or deliver to the Service
a written application on or before January 2, 2003. The application must be made
on a completed Agreement to Participate
and Selection of Settlement Option in the
form appended to this revenue procedure
as Exhibit 1. A separate application must
be submitted for each Contingent Liability Transaction for which the Taxpayer
elects to participate in one of the resolution methodologies provided for under this

734

revenue procedure. Such applications must
be sent to the Office of Tax Shelter Analysis (“OTSA”), LM:PFTG:OTSA, Attn: 351,
1111 Constitution Ave., N.W., Washington, DC 20024.
.02 With each application, the Taxpayer
must submit the following:
1) A statement identifying the total capital loss reported on the Taxpayer’s income
tax return(s) for the sale(s) of any stock issued by the transferee corporation in the
Contingent Liability Transaction, including the tax years affected and the amount
of the capital loss used in each year (including any carryback and carryforward periods);
2) A description of each class of stock
issued and outstanding by the transferee corporation at the completion of the purported
section 351 exchanges, including the number of shares issued in each class in the exchanges, to whom the stock was issued, the
issuing prices of the stock, the par values
and any voting rights;
3) A statement identifying any shares issued in the purported section 351 exchanges
in connection with the assumption of the
contingent liability that have not been sold
or otherwise disposed of by the Taxpayer;
4) A statement indicating the average
selling price per share of any stock issued by the transferee corporation in the
Contingent Liability Transaction;
5) A description of the type and bases
of the assets transferred by the Taxpayer in
the Contingent Liability Transaction; and
6) A description of the type and amount
of the liability assumed by the transferee
corporation in the Contingent Liability
Transaction.
.03 An Eligible Taxpayer that elects the
Fast Track Dispute Resolution Procedure —
Contingent Liability Cases, described in
Section 6, must also submit with its application a completed Arbitration Agreement
in the form appended to this revenue procedure as Exhibit 2. If the Arbitration
Agreement is executed by a person pursuant to a power of attorney executed by the
Taxpayer, that power of attorney must
clearly express the grant of authority by the
Taxpayer to consent to disclose the returns and return information of the Taxpayer by the Service to third parties, and
a copy of that power of attorney must be
attached to the Arbitration Agreement.

2002–43 I.R.B.

.04 The Taxpayer will be notified in
writing within 15 calendar days of the receipt of a complete application as to
whether the Taxpayer’s election has been
accepted as in compliance with the eligibility and application requirements of this
revenue procedure for the resolution methodology selected in the application. A Taxpayer becomes an electing taxpayer
(“Electing Taxpayer”) for purposes of this
revenue procedure, after it has been notified that its application has been accepted.
.05 If the Service denies a Taxpayer’s
application for participation under the Fixed
Concession Procedure because the Taxpayer does not satisfy either criterion under Section 5.01, the application may be
amended in writing within 10 days of receipt of the notice issued under Section 4.04
to elect the Fast Track Dispute Resolution Procedure — Contingent Liability
Cases set forth in Section 6.
.06 Denial of a Taxpayer’s request to
participate in either resolution methodology is not subject to judicial review.
SECTION 5. FIXED CONCESSION
PROCEDURE
.01 The Fixed Concession Procedure is
available to Eligible Taxpayers who have
engaged in a Contingent Liability Transaction and meet the requirements set forth
in Section 3.02 as well as the following additional requirements:
1) The Taxpayer filed a disclosure statement under the provisions set forth in Announcement 2002–2, 2002–2 I.R.B. 304; or
2) The Contingent Liability Transaction was already raised during an examination and, as a result, the Taxpayer was
unable to make a disclosure as outlined in
Announcement 2002–2. A Taxpayer qualifying under this provision must agree to
provide the information required by Announcement 2002–2 and certify under penalties of perjury that the person signing the
disclosure has examined the disclosure and
that to the best of that person’s knowledge and belief, the information provided
contains all relevant facts and is true, correct and complete.
.02 Under the Fixed Concession Procedure, an Electing Taxpayer is permitted a
capital loss deduction equal to 25% of the
amount of the capital loss reported for the
sale of the transferee stock received in the
Contingent Liability Transaction. In order
to prevent a duplication of the tax ben-

2002–43 I.R.B.

efits associated with the Contingent Liability Transaction, the Electing Taxpayer must
include an amount equal to the permitted
capital loss as ordinary income in equal
amounts per year over a period of 15 years
beginning with the 2003 taxable year, unless no member of the Electing Taxpayer’s consolidated group (including any
successor to such group) is at any time entitled to any tax benefits associated with the
deduction resulting from the liability assumed in the Contingent Liability Transaction. The Electing Taxpayer has the option
of an alternative method to achieve the
same economic result as the 15-year recovery based on a discount rate of ten percent. The closing agreement referenced in
Section 5.07 shall ensure that no entity that
was a member of the Electing Taxpayer’s
consolidated group (including any successor to such group) at any time will be entitled to both the permitted capital loss
deduction and the tax benefits associated
with the deduction resulting from the liability assumed in the Contingent Liability Transaction.
.03 No adjustment will be made to transactional cost deductions taken in connection with the Contingent Liability
Transaction.
.04 When the assumed liability is ultimately taken into account for tax purposes,
the tax benefits associated with it will be
allowed, as appropriate, under applicable legal principles in accordance with the
method of accounting of the corporation entitled to those benefits.
.05 No penalties under section 6662 will
be imposed for any deficiency attributable to the resolution of the Contingent Liability Transaction under this Fixed
Concession Procedure.
.06 The following conditions apply to
any stock or property held on or after October 4, 2002. The tax basis of any unsold stock shall be equal to the average
selling price per share of the stock that was
sold that generated the reported capital
losses (“Sold Stock”). Also, if the basis of
any property other than the stock received
in the purported section 351 exchanges was
determined directly or indirectly by reference to the basis of the stock received in
the purported section 351 exchanges, then
the basis of such property as of the date of
the Contingent Liability Transaction shall
be computed as if the basis of the stock received in the purported section 351 ex-

735

changes was equal to the average selling
price per share of the Sold Stock. For example, if the transferor contributed the stock
received to another corporation (“Corporation 2”) in return for stock in Corporation 2, then the transferor’s basis in the
stock of Corporation 2 shall be computed
as if its basis in the stock contributed to
Corporation 2 equaled the average selling
price per share of the Sold Stock. This basis redetermination requirement applies to
the Electing Taxpayer and to any person
within the effective control of the Electing Taxpayer. The closing agreement referenced in Section 5.07 shall ensure that the
basis of any property in the hands of any
member of the Electing Taxpayer’s consolidated group (including any successor to
such group), having a carryover or substituted basis determined directly or indirectly by reference to the basis of the stock
received in the purported section 351 exchanges, shall be computed as if the basis of the stock received in the purported
section 351 exchanges was equal to the average selling price per share of the Sold
Stock. The Electing Taxpayer shall provide all information needed to effect this
provision. Taxpayers who cannot or will not
provide this information cannot elect to participate under this revenue procedure.
.07 An Electing Taxpayer must enter into
a closing agreement with the Commissioner that reflects the terms described
above. The Compliance function within the
Service will close the case using established issue or case closing procedures, including the preparation of a Form 906,
Closing Agreement on Final Determination Covering Specific Matters.
SECTION 6. FAST TRACK DISPUTE
RESOLUTION PROCEDURE —
CONTINGENT LIABILITY CASES
.01 A Taxpayer electing the Fast Track
Dispute Resolution Procedure — Contingent Liability Cases must participate in
binding arbitration to resolve any issues that
are not resolved in the accelerated settlement negotiations. See Section 7 below. A
Taxpayer that elects the Fast Track Dispute Resolution Procedure — Contingent
Liability Cases will not be eligible for any
other settlement, mediation or arbitration
procedure.
.02 The following issues will be considered in the Fast Track Dispute Resolution Procedure — Contingent Liability
Cases:

October 28, 2002

1) The amount of capital loss permitted for the sale of stock received in the
Contingent Liability Transaction;
2) The identity of the corporation that
is entitled to the tax benefits associated with
the deduction resulting from the assumed
liability and whether that corporation is or
has been a member of the Electing Taxpayer’s consolidated group (including any
successor to that group);
3) With respect to the Electing Taxpayer or any member of the Electing Taxpayer’s consolidated group (including any
successor to such group), the manner and
timing of the reduction in the tax benefits
necessary to eliminate any duplication in the
tax benefits associated with the Contingent Liability Transaction in amounts that
in the aggregate equal the capital loss permitted; and
4) The penalties under section 6662 applicable to any deficiency attributable to the
resolution of the Contingent Liability Transaction under this Fast Track Dispute Resolution Procedure — Contingent Liability
Cases, except that no penalties will be asserted if the Electing Taxpayer previously
disclosed the Contingent Liability Transaction in accordance with Announcement
2002–2, or if the Electing Taxpayer did not
disclose solely because the Contingent Liability Transaction was already raised during an examination and, as a result, the
Electing Taxpayer was unable to make a
disclosure as outlined in Announcement
2002-2. An Electing Taxpayer that qualifies for a waiver of penalties under this provision must agree to provide the information
required by Announcement 2002-2 and certify under penalties of perjury that the person signing the disclosure has examined the
disclosure and that to the best of that person’s knowledge and belief, the information provided contains all relevant facts and
is true, correct and complete.
.03 Under the Fast Track Dispute Resolution Procedure — Contingent Liability
Cases, an Electing Taxpayer must concede between 50% and 90% of the amount
of the capital loss reported for the sale of
the stock, depending on the merits of the
case. Electing Taxpayers may negotiate or
arbitrate the identity of the corporation that
is entitled to the tax benefits associated with
the deduction resulting from the assumed
liability, and the manner and timing of the
reduction in the tax benefits associated with
the Contingent Liability Transaction; pro-

October 28, 2002

vided that no reduction of such tax benefits is required unless the tax benefits
associated with the deduction resulting from
the assumed liability are taken into account by the Electing Taxpayer or an entity that was a member of its consolidated
group (including any successor to such
group) at any time. No adjustment will be
made to transactional cost deductions taken
in connection with the Contingent Liability Transaction. In addition, Electing Taxpayers may negotiate or arbitrate the
applicability of any penalty proposed by the
Service under section 6662 associated with
the capital loss deduction. The tax basis of
any unsold stock (or property the basis of
which was determined directly or indirectly by reference to the basis in the hands
of the Electing Taxpayer of the stock received in the purported section 351 exchanges), as of October 4, 2002, will be
adjusted in the same manner as described
in Section 5.06.
.04 When the assumed liability is ultimately taken into account for tax purposes,
the tax benefits associated with it will be
allowed, as appropriate under applicable legal principles in accordance with the
method of accounting of the corporation entitled to those benefits.
.05 To the extent that the tax benefits associated with the deduction resulting from
the liability assumed in the Contingent Liability Transaction are taken into account
by the transferor or an entity that was a
member of the transferor’s consolidated
group (including any successor to such
group) at any time, the Electing Taxpayer
must negotiate or arbitrate to eliminate any
duplication in the tax benefits associated
with the Contingent Liability Transaction
using one of the following options: 1) reduce the amount of the deduction resulting from the liability assumed in connection
with the Contingent Liability Transaction;
or 2) recoup an amount equal to the permitted capital loss by including the amount
of the permitted capital loss as ordinary income. The manner and time period over
which such reduction or recoupment will
occur is also subject to negotiation or arbitration.
.06 Within 90 days from the date of the
notification to the Electing Taxpayer of its
acceptance into the procedure, the Electing Taxpayer will provide to LMSB all of
the information and documents specified in
Exhibit 3. The Electing Taxpayer’s fail-

736

ure to provide all of the information and
documents specified in Exhibit 3 constitutes grounds for elimination from the Fast
Track Dispute Resolution Procedure —
Contingent Liability Cases and Binding Arbitration Procedure as set forth in Section
6.09. In cases not governed by this settlement initiative, the Service and the Department of Justice will not be limited to
seeking the information set forth, described
or requested in Exhibit 3.
.07 Within 120 days from receipt of the
Electing Taxpayer’s information and documents, LMSB will complete its review of
the submission, issue additional document
requests to the Electing Taxpayer, if necessary, and conduct any necessary interviews.
.08 Within 20 days after any supplemental requests for information by LMSB,
the Electing Taxpayer will respond to the
outstanding requests for information. Electing Taxpayers may request an extension of
this period; however, the Service will grant
extensions only in exceptional circumstances and subject to its sole discretion.
.09 If the Electing Taxpayer fails to provide the requested information that is in its
possession or control, LMSB may elect to
eliminate the Electing Taxpayer from the
Fast Track Dispute Resolution Procedure —
Contingent Liability Cases and Binding Arbitration Procedure and the case will be subject to the full range of Service audit and
deficiency procedures. In addition, the Contingent Liability Transaction issue will not
be considered under the settlement, mediation or arbitration procedures under Notice 2001–67 (LMSB/Appeals Fast Track
Dispute Resolution Program), 2001–2 C.B.
544; Announcement 2002–60 (Extension of
Test of Arbitration Procedure for Appeals),
2002–26 I.R.B. 28; and Rev. Proc. 2002–44
(Mediation Procedure for Appeals), 2002–26
I.R.B. 10. Elimination from the Fast Track
Dispute Resolution Procedure — Contingent Liability Cases and Binding Arbitration Procedure will be reviewed and
approved by the applicable LMSB Director of Field Operations. Such decision shall
be final and not subject to judicial review.
.10 Within 30 days after the end of the
period for examination (see Sections 6.07
and 6.08 above), the Electing Taxpayer and
LMSB will exchange a written summary of
the facts, law and argument applicable to
the issues being considered under the Fast
Track Dispute Resolution Procedure —

2002–43 I.R.B.

Contingent Liability Cases. After all the
facts and circumstances have been evaluated, LMSB will determine whether penalties should be proposed.
.11 LMSB will promptly submit the administrative file related to the Contingent
Liability Transaction and the written summaries to Appeals. Appeals and the Electing Taxpayer will schedule an initial
meeting for the purpose of starting settlement discussions. Such meeting will be held
on a date agreeable to the parties, but no
later than 30 days from the receipt by Appeals of the administrative file and the summaries. A representative of the Electing
Taxpayer with decision-making authority
must participate in the settlement negotiation session or sessions.
.12 Appeals will attempt to facilitate an
agreement between LMSB and the Electing Taxpayer regarding the Fast Track Dispute Resolution Procedure — Contingent
Liability Cases issues, including penalties, if applicable. Under the Fast Track Dispute Resolution Procedure — Contingent
Liability Cases, Appeals will evaluate the
penalties based on the merits inherent in the
penalty issue. Appeals may make a recommendation regarding the settlement of any
or all issues. The parties have 60 days from
the date of the first meeting to reach an
agreed settlement on all disputed issues
identified in Section 6.02.
.13 Any proposed settlement is subject
to review and concurrence by an Appeals
Coordinator. If the parties reach a basis of
settlement, Appeals will effectuate the settlement of agreed issues using established issue or case closing procedures, including
the preparation of a Form 906, Closing
Agreement on Final Determination Covering Specific Matters.
SECTION 7. BINDING ARBITRATION
01. After the earlier of the expiration of
the 60-day period for reaching agreement
under Section 6.12, or the time the parties agree they will not reach a settlement
under the Fast Track Dispute Resolution
Procedure — Contingent Liability Cases,
the parties will take part in Binding Arbitration procedures. The Binding Arbitration will be conducted in accordance with
the provisions in the Arbitration Agreement, set forth in Exhibit 2. The provisions in the Arbitration Agreement are
mandatory and the agreement must be executed by the Electing Taxpayer when the

2002–43 I.R.B.

application to participate in the Fast Track
Dispute Resolution Procedure — Contingent Liability Cases is filed, or, at the latest, when the application for the Fixed
Concession Procedure is amended to elect
the Fast Track Dispute Resolution Procedure — Contingent Liability Cases.
.02 The Service will have 30 days for
additional factual development from the date
that the Electing Taxpayer is notified that
the Service has determined that the Fast
Track Dispute Resolution Procedure —
Contingent Liability Cases was unsuccessful.
1) During this period the Service may
request additional information or documents to complete a record for submission to the Arbitrator and the Electing
Taxpayer will provide a written response or
documents within 15 days of receipt of the
written request;
2) The Service may conduct interviews,
transcribed and under oath, of individuals
involved in any capacity with the transaction. Such identified witnesses, internal or
external to the Electing Taxpayer’s organization, may be interviewed in this manner regardless of whether such individuals
were interviewed by LMSB representatives at an earlier phase of this resolution
process or during audit. The Electing Taxpayer will make all witnesses who are employed by Electing Taxpayer’s organization
in any capacity available upon request and
will make good faith efforts to make all
other witnesses available during this 30day period.
.03 The Arbitration Agreement provides
that the parties agree to be bound by the decision of the Arbitrator in respect of the issue to be resolved.
.04 Appeals will assign an employee to
act as the Administrator (“Administrator”)
to manage and supervise the arbitration proceeding and to act as liaison between the
parties and between the parties and the Arbitrator.
.05 The Electing Taxpayer will select a
neutral arbitrator from a qualified list
(“Qualified List”) that the Service is in the
process of developing and that will be announced at a later time. The Qualified List
will consist of persons not employed by the
Department of the Treasury having expertise and experience in federal tax matters.
The Qualified List will be used to provide a pool of candidates from which one
arbitrator will be selected. Within 15 days

737

of the date that the Service notifies the
Electing Taxpayer that the Service has determined that the Fast Track Dispute Resolution Procedure — Contingent Liability
Cases was unsuccessful, the Electing Taxpayer must select three names from the
Qualified List and rank them in order of
preference. The Administrator will arrange
for the hiring of the Arbitrator, subject to
applicable rules and regulations for Government procurement. If the first candidate is unavailable, the Administrator will
contact the other candidates in the order indicated by the Electing Taxpayer.
.06 The Arbitrator shall have no official, financial, or personal conflict of interest with respect to the parties, unless such
interest is fully disclosed in writing to the
parties and the Administrator, and the parties agree to the continued participation of
the Arbitrator. A selected arbitrator who has
represented or currently represents a promoter or investor in a Contingent Liability Transaction, or whose firm has done so,
is not neutral and, therefore, will be ineligible to serve as an arbitrator in a proceeding under this revenue procedure. Each
party will pay one half of the Arbitrator’s
compensation, expenses, and related fees
and costs.
.07 The Arbitrator will be disqualified
from representing the Electing Taxpayer in
any pending or future action that involves
the transactions or issues that are the particular subject matter of the arbitration. This
disqualification extends to representing any
other parties involved in the transactions or
issues that are the particular subject matter of the arbitration. Members or employees of the Arbitrator’s firm will also be
disqualified from representing the Electing Taxpayer or any other parties involved
in the transactions or issues that are the particular subject matter of the arbitration in
an action that involves the transactions or
issues that are the particular subject matter of the arbitration, unless: (i) the Arbitrator disclosed the potential of such
representation prior to the parties’ acceptance of the Arbitrator; (ii) such action relates to a taxable year that is different from
the taxable year(s) under arbitration; (iii) the
firm’s internal controls preclude the Arbitrator from any form of participation in the
matter; and (iv) the firm does not allocate to the Arbitrator any part of the fee
therefrom.

October 28, 2002

The Arbitrator will not be prohibited
from receiving a salary, partnership share,
or corporate distribution established by prior
independent agreement. The Arbitrator and
the firm are not disqualified from representing the Electing Taxpayer or any other
parties involved in the arbitration in any
matter unrelated to the transactions or issues that are the particular subject matter
of the arbitration.
.08 The arbitration will be conducted using Final Offer Arbitration, also known as
“baseball” arbitration. Because the parties may continue negotiations during the
arbitration proceeding, the final settlement offers (“Final Offers”) proposed by
each party shall be clearly labeled as such.
The Final Offers of both parties shall result in a concession by the Electing Taxpayer of between 50% and 90% of the
capital loss reported by the Electing Taxpayer on the sale of the stock. The Final Offers will identify the corporation that the
party contends is entitled to the tax benefits associated with the deduction resulting from the assumed liabilities, indicate
whether that corporation is a member of the
Electing Taxpayer’s consolidated group (including any successor to such group), and
state the means for eliminating any duplication in the tax benefits associated with the
Contingent Liability Transaction. In addition, the Final Offers shall make clear
whether any penalty is proposed and accepted or rejected. Not more than 10 days
after submission of the memorandums supporting their respective positions (“Memorandum in Support”), see Section 7.12
below, the parties shall submit their Final
Offers.
.09 Only the following issue will be submitted to the Arbitrator:
Which of the two Final Offers presented
by the parties best reflects the hazards of
litigating the Electing Taxpayer’s entitlement to a capital loss deduction from the
sale of stock received as part of the Contingent Liability Transaction?
.10 The Arbitrator is not permitted to
make any conclusions of law or provide
reasoning that represents an interpretation of the law; however, it is necessary for
the Arbitrator to refer to the existing applicable law in considering the submitted
issue. Legal guidance will be provided by
the parties for purposes of establishing context, limited to guidance on the specific arguments presented in the Fast Track Dispute

October 28, 2002

Resolution Procedure — Contingent Liability Cases. With respect to factual information, the Electing Taxpayer may only
submit to the Arbitrator for consideration
material that was previously provided to
LMSB and Appeals in the Fast Track Dispute Resolution Procedure — Contingent
Liability Cases. The Service may also
present facts developed under Section 7.02.
The Arbitrator is not permitted to make any
findings of fact, except for resolving the issue stated in Section 7.09.
.11 The parties to the arbitration will be
the Electing Taxpayer and the Commissioner. The Electing Taxpayer may choose
to have the representation of counsel or an
authorized representative assist in preparing for and conducting the arbitration proceeding. The Office of Chief Counsel will
represent the Commissioner in the arbitration proceeding.
.12 Within 60 days of the date the proposed arbitrator is selected, the parties will
submit to the Administrator for submission to the Arbitrator, the administrative
record developed prior to and during the
Fast Track Dispute Resolution Procedure —
Contingent Liability Cases and a stipulation of facts based on the record. The Service is permitted to include additional
factual information developed pursuant to
Section 7.02 in these submissions. In addition, each party will submit the legal guidance on which it intends to rely as set forth
in section 6 of the Arbitration Agreement.
The legal guidance will consist of a list of
citations or copies of relevant cases and legal authority. Each party will also submit
a Memorandum in Support, not to exceed
30 pages, stating each party’s respective legal and factual contentions. The memorandum shall be typed only on one side of
opaque unglazed paper, 8 1/2 inches wide
by 11 inches long. All pages shall have margins on both sides of each page that are no
less than 1 inch wide, and margins on the
top and bottom of each page that are no less
than 3/4 inch wide. Text and footnotes shall
appear in consistent typeface no smaller
than 12 characters per inch, with double
spacing between each line of text and single
spacing between each line of indented quotations and footnotes. Quotations in excess of five lines shall be set off from the
surrounding text and indented.
.13 The Administrator will ensure that
each party receives the materials submitted by the opposing party. Any objections

738

to statements of fact, not previously presented, will be submitted to the Administrator within 10 days. If there are no
objections, the Administrator will forward
the submissions to the Arbitrator no earlier than the date the employment contract with the Arbitrator has been approved.
.14 Within 45 days of the date the Arbitrator receives the information set forth
in Section 7.12 above, the Arbitrator will
contact the parties through the Administrator and set the time for an arbitration
hearing, if the Arbitrator decides that a hearing is necessary. Any such hearing will not
exceed 8 hours, which shall include any oral
arguments or the presentation of witnesses,
as the Arbitrator may deem necessary. Alternatively, the Arbitrator may elect to render a decision based on the written record
alone, without a hearing.
.15 If, at any time prior to the date set
for the arbitration hearing, or if no hearing is ordered, prior to the decision of the
Arbitrator, the parties reach an agreement
resolving all issues relating to the Contingent Liability Transaction, the parties may
withdraw from the arbitration process by
notifying the Administrator. Any such settlement negotiated by Appeals will be subject to the concurrence of Counsel. If a
settlement is reached, Appeals will effectuate the settlement of agreed issues using established issue or case closing
procedures.
.16 Within 30 days after the hearing, the
Arbitrator will select one of the Final Offers proposed by the parties. After the Arbitrator renders a decision and advises the
Administrator and the parties of the decision, the case or issues will be closed using established procedures for case closing,
including preparation of a Form 906, Specific Matters Closing Agreement.
.17 The tax basis of any unsold stock (or
property the basis of which was determined directly or indirectly by reference to
the basis in the hands of the Electing Taxpayer of the stock received in the purported section 351 exchanges), as of
October 4, 2002, will be adjusted in the
same manner as described in Section 5.06.
SECTION 8. GENERAL PROVISIONS
These provisions apply to any Taxpayer
who has elected to participate in any of the
resolution methodologies set forth in this
revenue procedure.

2002–43 I.R.B.

.01 Any issue that is not resolved
through the resolution methodologies set
forth in this revenue procedure will be resolved using normal audit and deficiency
procedures.
.02 If applicable, a settlement entered
into as a result of any of the resolution
methodologies set forth in this revenue procedure will be reported to the Joint Committee on Taxation in accordance with
section 6405.
.03 Any Taxpayer electing to participate in any of the resolution methodologies set forth in this revenue procedure
agrees to waive the prohibition against ex
parte communications between Appeals employees and other Service employees, provided by section 1001(a) of the Internal
Revenue Service Restructuring and Reform Act of 1998, for purposes of pursuing settlement under this revenue procedure.
.04 The Binding Arbitration Procedure
set forth in this revenue procedure is confidential. Any dispute resolution communication related to the arbitration proceeding
is confidential and may not be disclosed by
any party, nonparty participant, or arbitrator except as provided under 5 U.S.C. § 574.
A dispute resolution communication includes all oral or written communications
prepared for purposes of a dispute resolution proceeding. See 5 U.S.C. § 571(5).
.05 The results of any settlement reached
through the resolution methodologies set
forth in this revenue procedure, including
the decision of the Arbitrator, may not be
used as precedent by any Taxpayer and will
not be binding on, or otherwise control, the
parties for taxable years not covered by a
specific matters closing agreement executed
by the parties.
.06 Service and Treasury employees who
participate in any way in the settlement procedures described in this revenue procedure and, pursuant to section 6103(n) of the
Internal Revenue Code of 1986, as
amended, any person under contract to the
Service, including the Arbitrator, that the
Service invites to participate will be subject to the confidentiality and disclosure provisions of the Code, including sections
6103, 7213, and 7431. See also 5 U.S.C.
§ 574.
.07 A Taxpayer that elects to participate in any of the resolution methodologies set forth in this revenue procedure
consents to the disclosure by the Service of
the Taxpayer’s returns and return informa-

2002–43 I.R.B.

tion incident to the settlement procedures
provided in this revenue procedure to the
Arbitrator and any participant identified in
any list of participants provided for in the
Arbitration Agreement, to any participant
for the Taxpayer identified in writing by the
Taxpayer subsequent to execution of the
Agreement, and to any persons, including
witnesses, who participate in the arbitration proceeding on behalf of either party.
.08 Any Taxpayer electing to participate in any of the resolution methodologies set forth in this revenue procedure
acknowledges that employees of the Service and all other Treasury employees involved in these proceedings are bound by
section 7214(a)(8) and must report information concerning violations of any revenue law to the Secretary.
.09 The Commissioner is not precluded
or impeded under section 7605(b) or any
administrative provisions adopted by the
Commissioner from conducting a later examination or inspection of records with respect to any taxable year of a participating
Taxpayer by inspecting information, documents and materials supplied in connection with this revenue procedure.
SECTION 9. EFFECTIVE DATE
This revenue procedure is effective
October 4, 2002.

whether the taxpayer has reported the disclosed items properly for income tax purposes. The collection of information is
required to obtain the benefits described in
this revenue procedure. The likely respondents are businesses or other for-profit institutions.
The estimated total annual reporting burden is 7,500 hours.
The estimated annual burden per respondent is an average of 50 hours, depending on individual circumstances. The
estimated number of respondents is 150.
The estimated frequency of responses is
one time per respondent.
Books or records relating to a collection of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally tax returns and tax return information are confidential, as required by
26 U.S.C. § 6103.
CONTACT INFORMATION
For information regarding this revenue
procedure, call Jo Ann Prager, Manager at
(202) 283–8445 (not a toll-free call). Ms.
Prager may also be reached by fax at (202)
283–8406 or electronically at the following email address: [email protected]. Please include “Revenue Procedure 2002–67” in the
subject line of any electronic communication.

SECTION 10. PAPERWORK
REDUCTION ACT
The collection of information contained
in this revenue procedure has been reviewed
and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507)
under control number 1545–1801. An
agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information unless the collection of information displays a valid OMB
number.
The collection of information in this revenue procedure is in the sections titled APPLICATION
PROCESS,
FIXED
CONCESSION PROCEDURE and FAST
TRACK DISPUTE RESOLUTION PROCEDURE — CONTINGENT LIABILITY
CASES. This information is required to apply the terms of the settlements set forth in
this revenue procedure and determine the
appropriate amount of penalties due, if any.
The information will be used to determine

739

October 28, 2002

Exhibit 1

Agreement to Participate and Selection of Settlement Option
1)

Agreement to Participate and Selection of Settlement Option. The undersigned desire(s) to participate in a settlement initiative described in Rev. Proc. 2002–67 for resolving cases involving Notice 2001–17 contingent liability
transactions. This settlement procedure is available to any taxpayer that has engaged in a contingent liability transaction, satisfies the requirements of Section 3.02 of Rev. Proc. 2002–67 and elects to resolve the issues in dispute
using this procedure.
By signing this agreement to participate under the settlement initiative described in Rev. Proc. 2002–67, the undersigned acknowledges that the decision to participate is irrevocable and that, if the taxpayer fails to provide all
of the information and documents specified in Rev. Proc. 2002–67, the contingent liability transaction issue will
be subject to the full range of Internal Revenue Service audit and deficiency procedures. The undersigned acknowledges that the contingent liability transaction issue will not be considered under the settlement, mediation or arbitration procedures under Notice 2001–67 (LMSB/Appeals Fast Track Dispute Resolution Program), 2001–2 C.B.
544; Announcement 2002–60 (Extension of Test of Arbitration Procedure for Appeals), 2002–26 I.R.B. 28; and Rev.
Proc. 2002-44 (Mediation Procedure for Appeals), 2002–26 I.R.B. 10.
The following is the option selected for this process:
____ Fixed Concession Procedure
____ Fast Track Dispute Resolution Procedure — Contingent Liability Cases
By choosing the Fast Track Dispute Resolution Procedure — Contingent Liability Cases, the undersigned agree(s)
to participate in Binding Arbitration, as set forth in Section 7 of Rev. Proc. 2002–67, if the Fast Track Dispute Resolution Procedure — Contingent Liability Cases is unsuccessful. Those taxpayers selecting the Fast Track Dispute
Resolution Procedure — Contingent Liability Cases must also submit with this form a completed Arbitration Agreement. See Section 7 and Exhibit 2 of Rev. Proc. 2002–67.
All requirements and provisions set forth in Rev. Proc. 2002–67 are incorporated herein by reference.

2)

Application Process. The undersigned will be notified in writing within 15 calendar days of the receipt of this completed form as to whether its election has been accepted.
If a taxpayer is denied participation under the Fixed Concession Procedure, its application may be amended in writing within 10 calendar days of receipt of the notice described above to elect the Fast Track Dispute Resolution Procedure — Contingent Liability Cases, as set forth in Section 6 of Rev. Proc. 2002–67. See Section 4.05 of Rev.
Proc. 2002–67.
Denial of a taxpayer’s request to participate in either resolution method is not subject to judicial review.

3)

Waiver of Prohibition on Ex Parte Communications. In accordance with the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105–226, 112 Stat. 685 (RRA ’98), and Rev. Proc. 2000–43, 2000–2
C.B. 404, it has been determined that ex parte communications may occur during the course of the settlement process. As defined in Rev. Proc. 2000–43, “ex-parte communications” are “communications that take place between
Appeals and another Service function without the participation of the taxpayer or the taxpayer’s representative.”
The undersigned acknowledge(s) that waiver of this prohibition is voluntary. By signing this agreement, the undersigned further acknowledge(s) that the concerns regarding ex parte communications are understood, but in the
interest of facilitating resolution of this case, the undersigned agree(s) to waive the prohibition between Appeals
and other Service personnel who are involved in pursuing settlement under the initiative described in Rev. Proc.
2002–67. This waiver covers all communications in the entire settlement process. This waiver will expire upon the
date the settlement process with respect to this case is completed or ends.

October 28, 2002

740

2002–43 I.R.B.

4)

Location of Settlement Conference. The undersigned requests that all meetings between the undersigned and the
Service relating to the settlement proceedings take place at [Insert City, State].

5)

Participants. The persons listed in this paragraph below are the primary participants in this settlement process on
behalf of the taxpayers. Additional persons who will participate will be listed at the end of this agreement.
Taxpayer Name:
Taxpayer EIN:
Address
Corporate Officer:
Telephone:

Fax:

Title:
Email:

Taxpayer Representative:
Name of Firm:
Address:
Telephone:
Fax:

Email:

If the Taxpayer identifies a representative, the Taxpayer must attach a power of attorney to this agreement that authorizes the representative to participate in the settlement and arbitration process.
6)

Case status.
a)
Is the case open in Compliance or Appeals?
b)
If so, who is the Service contact?
c)
Was the contingent liability transaction disclosed under Announcement 2002–2, 2002–2 I.R.B. 304?

7)

Certification of Compliance. Under penalties of perjury, the undersigned certifies:
a)
that each transferor involved in the contingent liability transaction carried out the purported section
351 exchanges and subsequent sales in accordance with the applicable operating documents;
b)
that one or more persons transferred property to the transferee corporation solely in exchange for stock
in such corporation (or such stock and other property or money) and immediately after the exchange such person (or persons) was in control (as defined in section 368(c)) of the transferee corporation; and,
c)
that the transferee is not an investment company within the meaning of section 351(e).

8)

Attachments. With this form, the undersigned must also submit the following, as specified in Section 4.02 of Rev.
Proc. 2002–67:
a)

b)

c)

d)
e)
f)

2002–43 I.R.B.

A statement identifying the total capital loss reported on the taxpayer’s income tax return(s) for the
sale(s) of any stock issued by the transferee corporation in the contingent liability transaction, including the tax years affected and the amount of the capital loss used in each year (including any carryback and carryforward periods);
A description of each class of stock issued and outstanding by the transferee corporation at the completion of the purported section 351 exchanges, including the number of shares issued in each class in
the exchanges, to whom the stock was issued, the issuing prices of the stock, the par values and any
voting rights;
A statement identifying any shares issued in the purported section 351 exchanges in connection with
the assumption of the contingent liability that have not been sold or otherwise disposed of by the taxpayer;
A statement indicating the average selling price per share of any stock issued by the transferee corporation in the contingent liability transaction;
A description of the type and bases of the assets transferred by the taxpayer in the contingent liability transaction; and
A description of the type and amount of the liability assumed by the transferee corporation in the contingent liability transaction.

741

October 28, 2002

9)

Statement of Agreement. By signing this Agreement to Participate and Selection of Settlement Option, the undersigned certifies that it has read and agrees to the terms of this document.

s/Taxpayer,

Date

s/Taxpayer Representative,

Date

Exhibit 2

Arbitration Agreement
1.

THE ARBITRATION PROCESS. Arbitration is mandatory as part of the procedures outlined in Rev. Proc. 2002–67
and will be used to assist________________________ (hereinafter “Taxpayer”) and the Commissioner of the Internal Revenue Service (collectively the “Parties”) in resolving certain issues relating to the Taxpayer’s participation in a Contingent Liability Transaction, a transaction designated by the Commissioner and Treasury as a “listed
transaction” in Notice 2001–17, 2001–1 C.B. 730. The applicable provisions and requirements of Rev. Proc. 2002–67
are hereby incorporated in this Agreement by reference.
The Parties have agreed to use Final Offer Arbitration, also known as baseball arbitration. The Final Offers of both
Parties shall reflect the following:
a) The amount of capital loss permitted on the sale of stock received in the Contingent Liability Transaction, which amount will reflect a concession by the Taxpayer of between 50% and 90% of the capital loss reported by the Taxpayer on the sale of the stock received in the Contingent Liability Transaction.
b) The identity of the corporation that is entitled to the tax benefits associated with the deduction resulting from the liability assumed in the Contingent Liability Transaction, including whether such corporation is or has been a member of the Taxpayer’s consolidated group (including any successor to
such group).
c) With respect to the Electing Taxpayer or an entity that was a member of the Electing Taxpayer’s
consolidated group (including any successor to such group) at any time, the manner and timing of
the reduction in the tax benefits necessary to eliminate any duplication in the tax benefits associated
with the Contingent Liability Transaction in amounts that, in the aggregate, equal the capital loss permitted under (a) above.
d) The amount of any penalty under section 6662.
The Arbitrator, after reviewing the Final Offers and the accompanying information, will choose one Final Offer.
Each Party’s Final Offer shall state an amount that reflects the above, including the effect of any present value calculation, as appropriate.
The Parties to this Agreement (see section 2 below) agree to be bound by the Arbitrator’s determination. There can
be no ex parte communications between the Arbitrator and any Party, third party, witness, agent, or other person
regarding the issues for arbitration. All communications between the Arbitrator and either Party, unless otherwise
stated, including requesting and transferring documentation and information, will be made through an Administrator. The Administrator for this Arbitration Session will be an Appeals employee to be assigned by Appeals. The Administrator will inform and discuss with the Parties the rules and procedures pertaining to the Arbitration process.

October 28, 2002

742

2002–43 I.R.B.

2.

PARTICIPANTS. The Parties to the arbitration will be the Taxpayer and the Commissioner. The Taxpayer may
elect to have the representation of counsel or an authorized representative to assist in preparing for and conducting the arbitration proceeding. The Office of Chief Counsel will represent the Commissioner in the arbitration proceeding. The specific participants on behalf of the Taxpayer in the Arbitration Session will be:
Taxpayer:
For Taxpayer:
No later than two weeks before commencement of the Arbitration Session, each Party will submit, to the Administrator and the other Party by facsimile, a complete and final list of participants who will attend the Arbitration
Session. The list must identify, for each participant, their position with the Party or other affiliation (e.g., a member of the XYZ law firm, counsel to the Taxpayer), and their address, telephone and fax numbers.

3.

SELECTION OF ARBITRATOR. The Parties have agreed to select an Arbitrator from a qualified list of eligible persons prepared by the Service, as described in Section 7.05 of Rev. Proc. 2002–67. Within 15 days of the
date that the Service notifies the Electing Taxpayer that the Service has determined that the Fast Track Dispute Resolution Procedure — Contingent Liability Cases was unsuccessful, the Taxpayer must select three names from the
qualified list and rank them in order of preference. If the first candidate is unavailable, the Administrator will contact the other candidates in the order indicated by the Taxpayer. The fees and costs of the Arbitrator will be shared
equally by the Parties. The Administrator will arrange for the hiring of the Arbitrator, subject to applicable rules
and regulations for Government procurement.
A selected Arbitrator who has represented or currently represents a promoter or investor in a Contingent Liability
Transaction, or whose firm has done so, is not neutral and, therefore, will be ineligible to serve as an arbitrator in
a proceeding under this revenue procedure. The selected Arbitrator will be disqualified from representing the Taxpayer in any pending or future action that involves the transactions or issues that are the particular subject matter
of the arbitration. This disqualification extends to representing any other parties involved in transactions or issues
that are the particular subject matter of the arbitration. Members or employees of the Arbitrator’s firm will also be
disqualified from representing the Electing Taxpayer or any other parties involved in the transactions or issues that
are the particular subject matter of the arbitration in an action that involves the transactions or issues that are the
particular subject matter of the arbitration, unless: (i) the Arbitrator disclosed the potential of such representation
prior to the parties’ acceptance of the Arbitrator; (ii) such action relates to a taxable year that is different from the
taxable year(s) under arbitration; (iii) the firm’s internal controls preclude the Arbitrator from any form of participation in the matter; and (iv) the firm does not allocate to the Arbitrator any part of the fee therefrom.
The Arbitrator will not be prohibited from receiving a salary, partnership share, or corporate distribution established by prior independent agreement. The Arbitrator and the firm are not disqualified from representing the Electing Taxpayer or any other parties involved in the arbitration in any matter unrelated to the transactions or issues
that are the particular subject matter of the arbitration.
The Arbitrator shall have no official, financial or personal conflict of interest with respect to the Parties, unless such
interest is fully disclosed in writing to the Parties and the Parties agree to the continued participation of the Arbitrator. See 5 U.S.C. § 573(a).

4.

ISSUE TO BE ARBITRATED. The Parties agree that only the following issue will be submitted to the Arbitrator:
Which of the two Final Offers presented by the Parties best reflects the hazards of litigating the Taxpayer’s entitlement to a capital loss deduction from the sale of stock received as part of the Contingent Liability Transaction?
In reaching a determination on the issue submitted, the Arbitrator may only consider the legal and factual arguments made in the Fast Track Dispute Resolution Procedure — Contingent Liability Cases, including the facts developed under Section 7.02 of Rev. Proc. 2002–67.

2002–43 I.R.B.

743

October 28, 2002

5.

BURDEN OF PROOF. In choosing between the Final Offers, the Arbitrator shall consider that the Taxpayer has
the burden of proving the facts by a preponderance of the evidence. To the extent the Taxpayer, in support of its
Final Offer, argues under section 357(b) that the liabilities assumed by the transferee in the Contingent Liability
Transaction should not be considered as money received by the Taxpayer on the exchange, the Arbitrator must take
into account the burden of proof standard as stated in section 357(b)(2).

6.

GUIDANCE FOR ARBITRATOR. Legal guidance for the Arbitrator shall be provided by the parties for purposes of establishing context, limited to guidance on the specific arguments presented in the Fast Track Dispute
Resolution Procedure — Contingent Liability Cases. The legal guidance will consist of a list of citations or copies of relevant cases and legal authority. With respect to factual information, the Taxpayer may only submit to the
Arbitrator for consideration material that was previously provided to LMSB and Appeals in the Fast Track Dispute Resolution Procedure — Contingent Liability Cases. The Service is permitted to include additional factual information developed pursuant to Section 7.02 of Rev. Proc. 2002–67. All material for the Arbitrator will be provided
through the Administrator.
The Arbitrator is not permitted to make any conclusions of law or provide reasoning that represents an interpretation of the law; however, it is necessary for the Arbitrator to refer to the existing applicable law in considering the
submitted issue. The Arbitrator shall look solely to the legal guidance provided by the Parties in determining the
issue presented and conducting the Arbitration Session. The Arbitrator is not permitted to make any findings of fact,
except for resolving the issue stated in section 4 of this Agreement.
If any legal guidance for the Arbitrator was overlooked, at the sole request of the Arbitrator, made through the Administrator, the Parties may agree upon further legal guidance and the manner in which it is to be communicated
to the Arbitrator.

7.

SUBMISSION OF MATERIALS. Within 60 days of the date the proposed Arbitrator is selected, the Parties will
submit to the Administrator for submission to the Arbitrator, the administrative record developed prior to and during the Fast Track Dispute Resolution Procedure — Contingent Liability Cases, any additional factual information developed by the Service pursuant to Section 7.02 of Rev. Proc. 2002–67, a stipulation of facts based on the
record and the legal guidance set forth in Section 6 of this Agreement. In addition, each Party will submit a memorandum supporting its respective positions, not to exceed 30 pages. The memorandum shall be typed only on one
side of opaque unglazed paper, 8 1/2 inches wide by 11 inches long. All pages shall have margins on both sides
of each page that are no less than 1 inch wide, and margins on the top and bottom of each page that are no less
than 3/4 inch wide. Text and footnotes shall appear in consistent typeface no smaller than 12 characters per inch,
with double spacing between each line of text and single spacing between each line of indented quotations and footnotes. Quotations in excess of five lines shall be set off from the surrounding text and indented. Not more than 10
days after submission of its memorandum, each Party shall submit its Final Offer. No additional factual information may be submitted by either Party after their Final Offer has been made.
Any and all information and materials that a Party provides throughout the Arbitration Session shall be submitted
to the Administrator. The Administrator will ensure that each Party receives the materials submitted by the opposing Party. Any objections to statements of fact, not previously presented, will be submitted to the Administrator within
10 days. If there are no objections, the Administrator will forward the submissions to the Arbitrator no earlier than
the date the employment contract with the Arbitrator has been approved.
a.

The Parties shall have no right to offer witnesses at the Arbitration Session. The Arbitrator has the
sole power to request the testimony of witnesses during the Arbitration Session and to direct the questioning of such witnesses.

b.

The Arbitrator may order a Party to produce other documents, exhibits or evidence deemed necessary or appropriate.

c.

At the Arbitrator’s sole discretion, oral arguments may be requested at the Arbitration Session. In the
absence of such a request, there will be no oral presentation by the Parties at the Arbitration Session.

October 28, 2002

744

2002–43 I.R.B.

d.

The Parties agree to clarify issues that may arise in calculating any deficiency or overpayment resulting from the Arbitrator’s decision.

e.

The Arbitrator’s decision will be used by the Parties to determine the Taxpayer’s tax liability and penalties, if applicable.

f.

The Parties agree that statutory interest will apply to any deficiency, including penalties, resulting from
the Arbitrator’s decision.

8.

CONTACT WITH ARBITRATOR. The Parties agree that there shall be no ex parte communications between the
Arbitrator and either Party or agent for a Party. In addition, the Arbitrator may not have contact with any other individuals, including witnesses outside the Arbitration Session, concerning the arbitration matter without the express approval of the Parties. Any contact with the Arbitrator by either Party must be in the presence of the other
Party and the Administrator. Should the Parties require additional information or clarification regarding the Arbitration process, they shall contact the Administrator.

9.

TIME OF ARBITRATION SESSION. Within 45 days of the date the Arbitrator receives the information to be
provided by the Parties under Section 7 of this Agreement, the Arbitrator will contact the parties and set the time
for the Arbitration Session, if the Arbitrator decides that a hearing is necessary. The Arbitrator will decide on the
necessity of oral arguments and presentation of witnesses during the Arbitration Session. If there are to be oral arguments during the Arbitration Session, the Arbitrator will decide the time allotted for the arguments. The Arbitrator is free to allocate time necessary for presentation of witnesses without regard for equal time between the Parties;
however, any such hearing will not exceed 8 hours, including any oral arguments or the presentation of witnesses.
Alternatively, the Arbitrator may elect to render a decision based on the written record alone, without a hearing.

10.

PLACE OF ARBITRATION. The Taxpayer has selected [City, State] as the site for the Arbitration Session, subject to change by agreement among the Parties and the Arbitrator. The Service will provide the space and facilities for the Arbitration Session.

11.

CONFIDENTIALITY. Service and Treasury employees who participate in any way in the arbitration process and
any person under contract to the Service pursuant to section 6103(n) of the Internal Revenue Code of 1986, as amended,
including the Arbitrator, that the Service invites to participate will be subject to the confidentiality and disclosure
provisions of the Internal Revenue Code, including sections 6103, 7213, and 7431. Any dispute resolution communication related to the arbitration proceeding is confidential and may not be disclosed by any party, nonparty
participant, or arbitrator except as provided under 5 U.S.C. § 574. A dispute resolution communication includes all
oral or written communications prepared for purposes of a dispute resolution proceeding. See 5 U.S.C. § 571(5).
The Taxpayer consents to the disclosure by the Service of the Taxpayer’s returns and return information incident
to the arbitration to any participant for the Taxpayer identified in the initial list of participants in section 2 of this
Agreement, to any participant for the Taxpayer identified in writing by the Taxpayer subsequent to execution of
this Agreement, and to any persons, including witnesses, who participate in this Arbitration Session on behalf of
either Party. If the Arbitration Agreement is executed by a person pursuant to a power of attorney executed by the
Taxpayer, that power of attorney must clearly express the grant of authority by the Taxpayer to consent to disclose the returns and return information of the Taxpayer by the Service to third parties, and a copy of that power
of attorney must be attached to this Agreement.

12.

I.R.C. SECTION 7214(a)(8) DISCLOSURE. The Parties acknowledge that employees of the Service and all other
Treasury employees involved in this arbitration are bound by section 7214(a)(8) and must report information concerning violations of any revenue law to the Secretary.

13.

RECORD. Neither the Taxpayer nor the Service shall make a stenographic record of the Arbitration Session, except that a transcript of the Arbitration Session may be provided to the Arbitrator, if requested. The Parties agree
that any stenographic record or other recording of the Arbitration Session shall remain confidential and will be destroyed once the Arbitrator reaches a decision.

2002–43 I.R.B.

745

October 28, 2002

14.

TERMINATIONS AND POSTPONEMENT. Due to the particular nature and scope of the Contingent Liability
Transactions and the procedures outlined in Rev. Proc. 2002-67, the Taxpayer agrees to full participation in this Arbitration Process. Termination by the Service for any reason other than final settlement with the Service will subject the Taxpayer to the full range of Service audit and deficiency procedures. In addition, the Contingent Liability
Transaction issue will not be considered under the settlement, mediation or arbitration procedures under Notice 2001–67
(LMSB/Appeals Fast Track Dispute Resolution Program), 2001–2 C.B. 544; Announcement 2002-60 (Extension of
Test of Arbitration Procedure for Appeals), 2002–26 I.R.B. 28; and Rev. Proc. 2002–44 (Mediation Procedure for
Appeals), 2002–26 I.R.B. 10.
If the Parties reach a settlement by agreement at any time prior to the date set for the arbitration hearing, or if no
hearing is ordered, prior to the decision of the Arbitrator, the Parties may withdraw from the Arbitration Process.
Any such settlement negotiations will be conducted by Appeals subject to the concurrence of Counsel. If settlement is reached, Appeals will effectuate the settlement of agreed issues using established issue or case closing procedures.

15.

DECISION BY ARBITRATOR. Within 30 days after the hearing, the Arbitrator will select one of the Final Offers proposed by the Parties. After the Arbitrator renders a decision and advises the Administrator and the Parties
of the decision, the case or issues will be closed using established procedures for case closing, including preparation of a Form 906, Specific Matters Closing Agreement. The closing agreement will include provisions reflecting
the requirements of Section 7 of Rev. Proc. 2002–67.

16.

ARBITRATOR’S DECISION IS FINAL. The Parties agree to be bound by the Arbitrator’s decision. Neither Party
may appeal the decision of the Arbitrator nor contest the decision in any judicial proceeding, including but not limited to the Tax Court, the Court of Federal Claims, or a federal district or federal appellate court. Each Party enters into this agreement in reliance on the other Party’s agreement to be bound by the decision of the Arbitrator.

17.

PRECEDENTIAL USE. The decision by the Arbitrator will not be binding on, or otherwise control, the Parties
for Contingent Liability Transactions not covered by the Arbitration. Except as provided in this Agreement, the Arbitrator’s decision may not be used as precedent by any Party.
The Commissioner is not precluded or impeded under section 7605(b) or any administrative provisions adopted by
the Commissioner from conducting a later examination or inspection of records with respect to any taxable year
of a participating Taxpayer by inspecting information, documents and materials supplied in connection with the Arbitration Session.

18.

JOINT COMMITTEE ON TAXATION. If applicable, a settlement entered into as a result of this Arbitration Proceeding will be reported to the Joint Committee on Taxation in accordance with section 6405.

INTERNAL REVENUE SERVICE
By:
Date:
[Taxpayer]
By:
Date:

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Exhibit 3
Information Request
A.
Fast Track Dispute Resolution Procedure — Contingent Liability Cases.
During the ninety (90) day period following its election to participate in the Fast Track Dispute Resolution Procedure — Contingent Liability Cases, the taxpayer will submit to the LMSB examination team assigned to its case the following information
and documents related to the purported Section 351 exchange(s), the liability company (“LC”), persons involved in the transactions, and the sale of the LC stock. The taxpayer may submit any additional information or documents it wishes the Internal Revenue Service to consider.
1.

Basic Transaction and Organizational Structure:
1.1.
Identify the transferor(s) and the transferee corporation(s) that participated in the purported Section 351 transaction or transactions that resulted in the transfer of liabilities by the taxpayer to the LC (“LC transaction”).
1.2.

Describe the stock that was issued to each transferor, including its class, characteristics, rights, preferences, restrictions, and obligations of its holders.

1.3.

Describe each step of the LC transaction in detail in the order of occurrence providing flowcharts or structural
diagrams, if available (creation of such documents would facilitate an earlier understanding of the issue).

1.4.

Describe the organizational structure of the LC before and after the transaction, providing supporting documentation including but not limited to:
1.4.1. Articles of Incorporation and Amended or Restated Articles.
1.4.2. Recapitalization documents.
1.4.3. All minutes or resolutions of the Board of Directors, Audit or Finance committees, or other approval committees pertaining to the planning, approval or implementation of the recapitalization and LC transaction, including all documents presented to the Board or committees.
1.4.4. Shareholders or Buy-Sell agreements, including amendments.

1.5.

If the LC was in existence prior to the transaction, describe its business operations and identify its significant assets and shareholders.
1.5.1. Was the LC a member of the taxpayer’s consolidated group before the transaction?
1.5.2. Was the LC a member of the taxpayer’s consolidated group after the transaction?

1.6.

State the purported business purpose of the LC transaction(s).

1.7.

Describe the transactions for which the taxpayer reported a capital loss for the sale of the LC stock.
1.7.1. Identify the purchaser(s) and seller(s) of the stock.
1.7.2. Describe any prior or subsequent relationships of the purchaser(s) and the seller(s) or the taxpayer.
1.7.3. Identify the LC stock that was sold to the purchaser(s).
1.7.4. Identify the capital loss reported on the sale of the LC stock and the taxable years in which the loss is
claimed, including amounts carried back and carried forward.
1.7.5. Describe how the taxpayer computed the basis of the LC stock sold.

1.8.

State the business purpose for the sale of the LC stock by the taxpayer.

1.9.

Copy of the General Ledger accounts of the taxpayer affected by any part of the contingent liability transaction.
1.9.1. Trace all identified items and amounts as line items on the taxpayer’s tax returns.

1.10.

The names and job titles of officers and other employees of the taxpayer familiar with the LC transactions and
subsequent events.
1.10.1. Identify the officers and other employees listed above who are available to meet with the audit team during the audit team’s 120-day review period.

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2.

3.

Planning and Source of the Transaction:
2.1.
Identify the source of the idea of an LC transaction and its structure.
2.1.1. Did the idea to engage in a LC transaction originate with an outside tax advisor to the taxpayer?
2.1.2. Did the idea to engage in a LC transaction originate with an outside business/non-tax advisor to the taxpayer?
2.1.3. Did the idea to engage in a LC transaction originate with the tax department of the taxpayer?
2.1.4. Did the idea to engage in a LC transaction originate in a business unit of the taxpayer?
2.1.5. Identify the principal persons within the taxpayer’s organization or outside the company who are the source
of the idea.
2.1.6. Identify the principal persons who participated in planning the LC transaction and its structure, including
their affiliation and role in the planning process.
2.2.

Copies of any communications, brochures, memoranda or other materials received from or sent to the sources (internal or external to the taxpayer’s organization) of the idea of a LC transaction.

2.3.

Describe any studies, analyses, forecasts, projections or other due diligence performed or prepared in connection
with planning the LC transaction by any entity involved.
2.3.1. Copy of any reports or documents identified in 2.3.

2.4.

Did the taxpayer receive any tax opinion(s) regarding the transaction?
2.4.1. Identify the author(s) of tax opinion(s).
2.4.2. Identify the source of the tax opinion(s).
2.4.3. Identify when the tax opinion(s) were received.
2.4.4. Who paid the author(s) of the tax opinion(s).
2.4.5. Copy of any engagement letter(s) pertaining to tax opinion(s) received.
2.4.6. Copy of the tax opinion(s).

2.5.

Did the taxpayer receive outside legal, actuarial or other professional opinions or studies regarding non-tax aspects of the LC transaction?
2.5.1. Copies of such opinions or studies.
2.5.2. Copies of engagement agreements pertaining to the scope of the services performed and compensation arrangements.

2.6.

Was the taxpayer subject to confidentiality agreement(s) with its outside tax advisor(s) within the meaning of section 6111(d)?
2.6.1. Copies of such agreement(s).

2.7.

Identify the capital gains that were netted with the stock capital loss.
2.7.1. When were the capital gains transactions completed and gain amount known?

Third-Party Shareholders of the LC:
3.1.
How were the third-party shareholders identified or selected to participate in the LC transaction?
3.1.1. Copies of communications with the third party and other materials pertaining to the LC transaction provided to the third party.
3.1.2. Were any third-parties owned directly or indirectly by any person or entity involved in the source or planning of the LC transaction? Identify that ownership relationship.
3.2.

Was a third-party shareholder organized for the purpose of the LC transaction?
3.2.1. If so, identify the shareholder and who organized it?

3.3.

Describe the business activities of the third-party shareholders prior to becoming a shareholder of the LC.

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3.4.

Did a third-party shareholder, or any affiliate of a third-party shareholder, have any prior relationship with the taxpayer?
3.4.1. Describe the nature of that relationship?
3.4.2. Copy of any agreements pertaining to that relationship.

3.5.

Did the taxpayer solicit other persons or entities to be shareholders of the LC that did not become shareholders?
3.5.1. Identify the other persons or entities.
3.5.2. Provide a copy of any correspondence or other solicitation materials.

3.6.

Copy of agreements with a third-party shareholder, including but not limited to:
3.6.1. Subscription agreement or other purchase commitment.
3.6.2. Other documents evidencing the purchase of the LC shares, such as buy-sell, purchase or sale agreements.
3.6.3. Other formal or informal arrangements between taxpayer or LC and third party that might offset, in whole
or in part, any risks or rights to profits that the third party had in the LC.

3.7.

Did the taxpayer and third-party shareholders negotiate over the terms of the stock or the purchase price of the
shares issued to them?
3.7.1. Identify the persons who engaged in such negotiations.
3.7.2. Did any third-party shareholder perform a due diligence study or investigation in connection with its purchase? Identify any such shareholders and describe the due diligence performed.
3.7.3. Copies of documents provided to the third party in connection with its due diligence efforts.

3.8.

Why did the third party become a shareholder of the LC?
3.8.1. From the taxpayer’s perspective, what value did the third-party shareholder add to the LC?

3.9.

Did any third-party shareholder have a nonshareholder relationship with the taxpayer or the LC after the transaction?
3.9.1. Describe the nature of that relationship.
3.9.2. Copy of agreements pertaining to that relationship.

3.10.

Provide the name, current position, address and telephone number of a primary contact person for each thirdparty shareholder who has personal knowledge about the third party’s participation in the LC transactions or stock
sale, and if such person is not currently an employee or representative of the third party, the name of a person
who has access to third-party records.
Are there any restrictions on the ability of the third-party shareholder to sell the stock?
Did any agreement provide the third-party shareholder with a means of disposing of its stock? If so, provide such
agreement or agreements.
If the price for resale of the stock was subject to some future contingency or valuation, provide any documents
showing expectations at, or in advance of, the time of the LC transaction showing the projected sales price.
Who currently owns the LC stock? If it has been sold or transferred, supply the details of such sale or transfer.

3.11.
3.12.
3.13.
3.14.
4.

Assets Transferred:
4.1.
Identify all the assets transferred to the LC by the transferors in the purported Section 351 exchange, including
its basis in the hands of the transferor and its fair market value at the time of the transfer.
4.2.

If the assets transferred consisted of intercompany account or note receivables:
4.2.1. Did the receivable exist prior to planning the LC transaction? If so, describe when and how it originated.
4.2.2. If not, did the taxpayer have a business purpose for the creation of the intercompany receivable? Describe the business purpose and provide documentation supporting that business purpose.
4.2.3. Were any payments made on the receivable to the LC after the LC transaction?
4.2.4. Identify the amounts paid, by whom and when.
4.2.5. Identify how the payments were made, e.g., cash or journal entries.

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4.2.6. Supply documentation demonstrating that the obligor was financially capable of making the payments due
on any debt instrument contributed to the capital of the LC.
4.2.7. Were any assets transferred to the obligor on any debt instrument contributed to the capital of the LC within
60 days before or after the date on which the obligation was created?

5.

4.3.

If the assets transferred consisted of cash, describe how the LC utilized the cash.
4.3.1. Were there any side agreements associated with the transfer of cash?
4.3.2. If so, provide copies of any lending agreements, loans, notes, letters of credit or other documents between the LC, taxpayer, or other members of the taxpayer’s group.

4.4.

Copy of documents evidencing the asset, such as
4.4.1. Promissory notes for receivables.
4.4.2. Purchase agreements for other assets owned by a transferor.

4.5.

Copy of transfer documents, such as
4.5.1. Assignments.
4.5.2. Wire transfers for cash.

4.6.

Document the basis of all assets transferred that affect the basis of the stock sold.

Nature of Liabilities Transferred:
5.1.
Specifically identify the liabilities transferred.
5.2.

How were the liabilities identified?
5.2.1. Who identified the type of liabilities to be transferred?
5.2.2. Who identified the specific liabilities transferred?
5.2.3. What criteria was used to select the liabilities transferred?
5.2.4. Were all liabilities of the taxpayer of the same nature or type transferred to the LC (e.g., were all environmental liability risks transferred or only selected ones)?
5.2.5. How was the amount of the liabilities to be transferred determined and computed?

5.3.

Did the taxpayer perform an in-house valuation of the liabilities?
5.3.1. Who performed the valuation?
5.3.2. Describe the person(s) qualifications to value the liabilities.
5.3.3. Copy of the valuation report, including assumptions, conclusions and worksheets or compilation of the results.

5.4.

Did the taxpayer receive third-party valuation(s) of the liabilities to be transferred?
5.4.1. Who performed the valuation?
5.4.2. Describe the person(s) qualifications to value the liabilities.
5.4.3. Copy of the valuation report, including assumptions, conclusions and worksheets or compilation of the results.

5.5.

Was the taxpayer studying ways to manage or reduce the liabilities transferred to the LC before considering whether
to engage in the LC transaction?
5.5.1. Who was conducting the study?
5.5.2. Documentary evidence that such study was being performed and when.

5.6.

Did the transferred liabilities relate directly to a core business activity of the taxpayer?
5.6.1. Identify the core business activity and the liabilities’ relationship to it.
5.6.2. How were the liabilities reported by the transferor for financial reporting purposes prior to the LC transaction?

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6.

7.

5.7.

Did the taxpayer make subsequent transfers of similar liabilities to the LC?
5.7.1. Describe the subsequent transfers.

5.8.

Was the taxpayer required to give notice to and/or obtain approval of a relevant Federal or State regulatory agency
with respect to the transfer of the liability?
5.8.1. If so, was such notice given/approval obtained?
5.8.2. Provide copies of the notice(s) and approval(s).

5.9.

Was the taxpayer required to give notice to and/or obtain approval of other third parties (e.g., employees, banks,
lenders or other creditors, particularly the creditors of the specific liability transferred) with respect to the transfer of the liability?
5.9.1. If so, was such notice given/approval obtained?
5.9.2. Provide copies of the notice(s) and approval(s).

Management of Liabilities Transferred:
6.1.
Describe how the liabilities were managed or administered before the LC transaction, including the name and position of the person responsible for overseeing the daily management or administration activities.
6.2.

Describe how the management or administration of the liabilities changed after the LC transaction, including the
name and position of the person responsible for overseeing the daily management or administration activities.

6.3.

Did any of the third-party shareholders play an active and ongoing role in the management and/or administration of the liabilities before or after the LC transaction?
6.3.1. Describe the role played.
6.3.2. Copy of any agreements with third-party shareholders related to the management and/or administration of
the liabilities.

6.4.

Did the LC engage the services of outside consultants or other professionals in connection with the management
or administration of the liabilities?
6.4.1. Identify the consultants or professionals.
6.4.2. Describe the consultants’ experience or other qualifications in managing or administering the types of liabilities transferred to the LC.
6.4.3. Describe the services performed.
6.4.4. Copy of any agreements with such consultants or professionals.

6.5.

If any liabilities have been paid since the LC transaction, identify the entity that made the actual payments to the
creditor?
6.5.1. If any liabilities were actually paid by someone other than the LC, how did the LC record the payments?

Liability Company
7.1.
Did the LC have any employees or officers?
7.1.1. How many and what services did they perform?
7.1.2. Who paid their compensation, including bonuses?
7.1.3. Were any of these individuals also employees or officers of the taxpayer’s affiliated group?
7.1.4. Identify the CEOs or CFOs of the LC since the LC transaction to current.
7.2.

Did the LC have business operations that were separate from the management and/or administration of the liabilities transferred in the LC transaction?
7.2.1. Describe those operations.

7.3.

Did the LC manage or administer liabilities of parties unrelated to the taxpayer?
7.3.1. Describe.

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B.

7.4.

Describe any specific activities of the LC that were intended to reduce or improve management of the liabilities.

7.5.

Did the LC achieve cost savings with respect to the liabilities it assumed?
7.5.1. Identify those savings and provide a computation evidencing the savings.

7.6.

Did the LC transaction confer any non-tax economic, accounting or financial statement benefits for the taxpayer? Describe.

7.7.

Have any of the liabilities been paid, satisfied, written-off or eliminated since transferred to the LC?
7.7.1. Identify the liabilities and amounts, including the taxable year.
7.7.2. Describe how the liability was paid or otherwise satisfied.
7.7.3. If the liability has been written-off by a creditor or eliminated by the taxpayer or LC, explain the circumstances.

7.8.

Did the LC claim deductions or capitalize the payment of any of the liabilities?
7.8.1. Identify the amounts claimed, including the taxable years reported and whether deducted or capitalized.

7.9.

Provide the following documents:
7.9.1. Separate financial statements of the LC since the LC transaction (if such statements are not available, yearend trial balances of the LC).
7.9.2. If the LC was not a member of the taxpayer’s consolidated group for federal income tax purposes at any
time since the LC transaction, a copy of the LC’s separate Forms 1120 for that period.
7.9.3. Copies of minutes of meetings of shareholders and/or board of directors of the LC since the LC transaction.
7.9.4. Copy of General Ledger accounts affected by the contingent liability transaction, payments of liabilities
and collections on receivables transferred.

Disclaimer. In cases not governed by this settlement initiative, the IRS and the Department of Justice will not be limited to seeking the information set forth, described or requested in this Information Request.

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