PRACTISING LAW INSTITUTETAX STRATEGIES FOR CORPORATE

ACQUISITIONS,DISPOSITIONS, SPIN-OFFS, JOINT VENTURES,

FINANCINGS, REORGANIZATIONS ANDRESTRUCTURINGS 2013

Appendix to Section 338(h)(10)

By

Mark J. SilvermanSteptoe & Johnson LLP

Washington, D.C.

Copyright © 2013, Mark J. Silverman, All Rights Reserved.

2

Internal Revenue Service Circular 230 Disclosure: As provided for in IRS regulations, advice (if any) relating to federal taxes that is contained in this document (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

3

Acquisition with Section 338(h)(10) Election

T Stock

S P

T

$

S P

Old T$

New T

T assets

4

Acquisition Period for Purchases from Related Corps.

P

1. S owns 100% of the stock of T.

2. On January 1, Year 1, P purchases 30% of the stock of S.

3. On March 1, Year 1, P purchases an additional 30% of the stock of S.

4. On February 1, Year 2, S is liquidated, and P receives 100% of the T stock in the liquidating distribution.

5. May P make a section 338(h)(10) election with respect to its acquisition of T?

S

T

60%

T Stock100%

5

Step Transaction Doctrine- Rev. Rul. 2001-46Situation 1

Facts: P owns all of the stock of S, a newly formed wholly owned subsidiary. Pursuant to an integrated plan, P acquires all of the stock of T, an unrelated corporation, in a statutory merger of S into T, with T surviving. In the merger, the T shareholders exchange their stock for consideration of 70% P voting stock and 30% cash. Immediately thereafter, T merges upstream into P.

Result: If the acquisition were viewed independently from the upstream merger of T into P, the result should be a QSP of T stock followed by a section 332 liquidation. See Rev. Rul. 90-95, 1990-2 C.B. 67. However, because step transaction principles apply, see King Enterprises, Inc. v. United States, 418 F.2d 511 (Ct. Cl. 1969), the transaction is treated as a single statutory merger of T into P under section 368(a)(1)(A). P acquires the T assets with a carry-over basis under section 362, and P may not make a section 338 election for T. Note: On July 8, 2003, the Service issued new final and temporary regulations that permit taxpayers to turn off the step transaction doctrine and to make a section 338(h)(10) election in the transaction described above. See Treas. Reg. § 1.338-3(c)(1)(i), (2) and Temp. Treas. Reg. § 1.338(h)(10)-1T.

P

S T

100%

P

T

Merge

100% T stockT Shareholders

Merge

70% P voting stock and30% cash

Step 1 Step 2

6

Temp. Treas. Reg. § 1.338(h)(10)-1T(c)(2), (e)

• The new temporary regulations provide that “a section 338(h)(10) election may be made for T where P’s acquisition of T stock, viewed independently, constitutes a qualified stock purchase and, after the stock acquisition, T merges or liquidates into P (or another member of the affiliated group that includes P) . . . ” Temp. Treas. Reg. § 1.338(h)(10)-1T(c)(2).

• This rule applies regardless of whether, under the step transaction doctrine, the acquisition of T stock and subsequent merger or liquidation of T into P (or P affiliate) qualifies as a reorganization under section 368(a). Id.

• If a section 338(h)(10) election is made under these facts, P’s acquisition of T stock will be treated as a QSP for all Federal tax purposes and will not be treated as a reorganization under section 368(a). See Temp. Treas. Reg. § 1.338(h)(10)-1T(e), Ex. 12 & 13.

• However, if taxpayers do not make a section 338(h)(10) election, Rev. Rul. 2001-46 will continue to apply so as to recharacterize the transaction as a reorganization under section 368(a). See id. at Ex. 11.

• The regulations are effective for stock acquisitions occurring on or after July 8, 2003.

7

Step Transaction Doctrine- Rev. Rul. 2001-46Situation 2

Facts: Same facts as in Situation 1, except that the T shareholders receive solely P stock in exchange for their T stock, so that the merger of S into T, if viewed independently of the upstream merger of T into P, would qualify as a reorganization under section 368(a)(1)(A) by reason of section 368(a)(2)(E).

Result: Step transaction principles apply to treat the transaction as a merger of T directly into P.

Note: The taxpayers cannot not change this result under the new section 338 regulations because, standing alone, P’s acquisition of T does not constitute a qualified stock purchase.

P

S T

100%

100% P voting stock

P

T

Merge

100% T stock

Merge

T Shareholders

Step 1 Step 2

8

Bootstrap Purposes Redemptions from Unrelated Parties

P

T

1. On January 1, Year 1, P purchases 60% of the stock of T from B.

2. On June 1, Year 1, T redeems all of the stock of T held by A.

3. June 1, Year 1, is the acquisition date.

S

60%40%

T stock

$

$

T stock

9

Bootstrap Purposes Redemptions from Related Parties

P

T

1. P owns 30% of the stock of T.

2. On December 15, Year 1, T redeems the T stock held by P.

3. On December 1, Year 2, P purchases the T stock held by A.

4. P has not made a qualified stock purchase of T. The redemption of P’s T stock is not taken into account.

A

30%70%

T stock

$

(2)

T stock(1)

$

10

Bootstrap Purchases Redemptions from Related Persons - Exception

X

T

1. On January 1, Year 1, P purchases 60% of X Stock.

2. On April 1, Year 1, T redeems X’s T stock.

3. Also on April 1, Year 1, P purchases the T stock held by A.

4. P has made a qualified stock purchases of T on April 1, Year 1.

A

60%

$

T stock(2)

P(1)60%

T stock(3)

$

40%

11

Section 338(h)(10) and “Busted 351” Transaction

P

ZX Y

Facts

1. P, X, Y, and Z file a consolidated return.

2. P wishes to sell X and Y to the public and to step up the basis of the X and Y assets.

12

Section 338(h)(10) and “Busted 351” Transaction Continued

P

Z

X Y

N

PUBLIC

(1) Newco formed(2)

X & YStock

(3) N sto

ck

3. P forms Newco (N) and P transfers the X and Y stock to N. Pursuant to a prearranged plan, P sells the N stock to the Public.

13

Section 338(h)(10) and “Busted 351” Transaction Continued

Results

1. The transfer of the X and Y stock to N should not qualify as a section 351 transaction. P is not in control of N immediately after the transfer. See Rev. Rul. 79-194, 1979-1 C.B. 145; TAM 9747001 (July 1, 1997); PLR 9541039 (July 20, 1995), as modified by PLR 9549036 (Sept. 12, 1995); PLR 9142013 (July 17, 1991).

2. Thus, N is deemed to purchase the X and Y stock.

3. In this event, P and N can file a section 338(h)(10) election to treat the transaction as a sale of assets by X and Y followed by section 332 liquidations.

4. The recently issued final regulations contain a similar example. See Treas. Reg. § 1.338-3(b)(3)(iv), Ex. 1.

5. How much stock does P have to sell?

• P must sell more than 20% of N stock for section 351 not to aapply. See section 351(a) and 368(c).

• P must sell at least 50% of the N stock so that P and N are not related for purposes of section 338(h)(3)(A)(iii).

• P must sell more than 80% of the N stock to avoid the application of the anti-churning rules of section 197(f)(9).

• Prior to the effective date of recently finalized Treas. Reg. § 1.197-2 it was possible that the anti-churning rules could have applied even if P sold all of the N stock because of the momentary relationship between P and N. See Old Prop. Treas. Reg. § 1.197-2(h)(6)(ii).

14

Section 338(h)(10) and “Busted 351” Transaction Variation

P

Z

X Y

N

PUBLIC

(1) Newco formed(2)

X & YStock

(3) N stock

(3) N

sto

ck

Facts1. Same as above, except that both P and N sell stock to the public.

Results1. Does section 351 apply? If so, section 338(h)(10) is not available .

2. Does the answer change if P and N each use different investment bankers?

Intragroup Section 338(h)(10) ElectionExample – Recent PLRs

Facts: P is the common parent of a consolidated group. T operates Businesses A and B. T distributes Business B to P. P forms Newco and transfers the stock of T to Newco in exchange for Newco common and preferred stock. Pursuant to a binding obligation, P sells the Newco preferred stock to an unrelated third party. P distributes all of the Newco common stock to its public shareholders. P’s shareholders sell their P stock to Buyer.

Result•Newco’s acquisition of T is a qualified stock purchase under section 338(d)(3). P and Newco are permitted to make an election under section 338(h)(10) with respect to the retained Business A held by T. See PLR 201126003; see also PLRs 201228011, 201203004 and 201145007.

P

Newco

Newco

Common Stock

Newco

Preferred Stock

Cash

T StockBusines

s B

15

Newco Stock – Common

and Preferred

(2)

(3)

(4)Shareholders

Third-Party

(1)

Buyer

P Stock

(5)Cash

Business A

Busine

ss B

T

Current

Shareholders

Target

Business B

Business A

NewCo 1

NewCo 2

NewCo 3

Target Sub

(1)

Business B, cash, other properties

(2)

Current

Shareholders

Parent

Target

Business B

Business

A

NewCo 1

NewCo 2

NewCo 3

Target Sub

NewCo 1 common and

preferred interests

NewCo 1 common and

preferred interests

(3)

NewCo 1 common and

preferred interests

Target stock

(4)

3rd Party

NewCo 1

preferred

interests

(4)

Step 1: Parent will form NewCo 1. NewCo 1 will form NewCo 2. NewCo 2 will form NewCo 3. The three entities will be formed as LLCs and will elect to be treated as corporations for federal

income tax purposes.

Step 2: Target will distribute cash, Business B and various other properties to Parent. This distribution is intended to be part of the deemed section 332 liquidation in connection with the

section 338(h)(10) election for Target.

Step 3: NewCo 1 will contribute its common membership interests and preferred membership interests to NewCo 2. NewCo 2 will contribute the NewCo 1 common and preferred membership

interests to NewCo 3.

Step 4: Parent will transfer 100% of the stock of Target to NewCo 3 in exchange for NewCo 1 common and preferred membership interests. Pursuant to a binding obligation, Parent will transfer

the NewCo preferred interests to an unrelated third party. A section 338(h)(10) election will be made with respect to the acquisition of the stock of Target.

PLR 201126003

Parent

16

Current

Shareholders

Parent

Target

Business B

Business A

NewCo 1

NewCo 2

NewCo 3

Target Sub

NewCo 1 common interests

REIT

$

Parent

Stock

(5)

(6)

Current

Shareholders

Target

Business A

NewCo 1

NewCo 2

NewCo 3

Target Sub

Business B

REIT

Business B

Public

Less than 10%

Step 5: Parent will distribute 100% of the NewCo 1 common membership interests to the Current Shareholders. The distribution is intended to constitute a dividend pursuant to

sections 301 and 316.

Step 6: Current Shareholders will sell their parent stock to REIT and Parent and Business B will elect REIT status. Upon exercise of an option, REIT may acquire 9.9% of NewCo 1’s

common interests from NewCo 1.

PLR 201126003Final

Structure

Parent

Parent

17

PLR 201145007

Facts: Parent was the parent of an affiliated group of corporations filing a life-nonlife consolidated return that conducted Business A and Business B. Parent owned all of the stock of

Sub 1. Parent also owned (i) all of the interests in LLC1, a disregarded entity that conducted a part of Business A, and (ii) the stock of Subs 2 through 5. Sub 1 owned (i) all of the outstanding stock of Sub 6, which conducted the majority of Business A and a portion of Business B; (ii) Sub 7, which conducted a part of Business B and a part of Business A; (iii) Sub 8, which conducted a

part of Business B; and (iv) the stock of Subs 9 through 12.

 

Parent formed NewCo, which formed NewCo Sub. NewCo issued NewCo common stock and NewCo preferred stock to NewCo Sub. All assets and liabilities relating to Business A were transferred and consolidated in S1, LLC1, and Sub 6, and all assets and liabilities relating to

Business B were transferred and consolidated into the remaining applicable Subs.

 

To separate Business B from Business A, Parent transferred Subs 2 through 5 to NewCo Sub, and Sub 1 transferred Subs 7 through 12 to NewCo Sub. In exchange, Parent and Sub 1 each

received a pro rata share of the NewCo common and preferred stock held by NewCo Sub. Parent and Sub 1 immediately sold the NewCo preferred stock to certain investors for cash

pursuant to a preexisting agreement, which Parent used to repay certain indebtedness (Sub 1 distributed the cash and NewCo common stock it received to Parent).

P

Sub 2 – Sub

5Sub 1

Sub 6 Sub 7 Sub 8Sub 9 –Sub

12

NewCo

NewCo Sub

LLC1

18

(2)Investors

NewCo

Preferred

Stock

Sub 7 –

Sub 12(1)

Sub 2 –

Sub 5

PLR 201145007

Facts (cont’d): Acquiring formed Merger Sub, which merged with Parent, with Parent surviving. In the merger, (i) holders of Parent common and preferred stock received NewCo common stock and cash in exchange for their Parent stock, and (ii) Acquiring's membership interests in Merger Sub were converted into shares of Parent common stock. Immediately after the Merger, Acquiring owned 100% of Parent, the investors held all of the NewCo preferred stock, Parent’s former common and preferred shareholders had received cash and held all of the NewCo common stock, and neither Parent nor Sub 1 owned any stock in NewCo.

The parties intended to make section 338(h)(10) elections with respect to the transfers of the subsidiary stock made by Parent and Sub 1 (Subs 2-5 and Subs 7-12, respectively) and with respect to the deemed transfers of stock of certain direct and indirect subsidiaries owned by such subsidiaries (Subs 13-39). Parent expected that the deemed asset sales resulting from the section 338(h)(10) elections with respect to the transferred subsidiaries would generate a net ordinary loss, life insurance company loss from operations, or both, and net capital gain.

P

Sub 2 – Sub

5

Sub 1

Sub 6

Sub 7 –Sub

12

NewCo

NewCo Sub

LLC1

Acquiring

Merger Sub

Sub 2 – Sub

5

Sub 7 –Sub

12

NewCo

NewCo Sub

P

Sub 1

Sub 6

LLC1

Acquiring

19

PLR 201145007

Rulings •NewCo Sub’s acquisitions of the stock of the subsidiaries transferred by Parent and Sub 1 qualify as “qualified stock purchases” under section 338(d)(3), and, assuming a section 338(h)(10) election is made with respect to its direct shareholder, the deemed sale of the stock of each of the lower-tiered subsidiaries (Subs 13-39) resulting from the deemed asset sale of the respective transferred subsidiary will qualify as a QSP. •Parent (as the common parent of the selling consolidated group) and NewCo Sub (by the common parent of its consolidated group) will be eligible to make section 338(h)(10) elections with respect to such QSPs.•Parent’s group will be entitled to deduct in the taxable year ending on the closing date of the Merger, to the extent otherwise deductible, losses recognized by the subsidiaries transferred (directly and indirectly) by Parent and Sub 1 on the deemed sales of their assets. •Neither NewCo nor NewCo Sub will be a successor to Parent for purposes of section 1504(a)(3), and NewCo and its direct and indirect subsidiaries that are includible corporations and that satisfy the ownership requirements of section 1504(a)(2) will be members of an affiliated group of corporations entitled to file a consolidated federal income tax return immediately following the Merger.

20

PLR 201203004

Facts

•D, a publicly-traded corporation, owns all of the stock of S (which operates Business A) and T (which operates Business B). T’s assets have built-in loss.

•To separate Business A from Business B, D engages in the following steps:• D forms Newco and transfers the T stock to Newco in exchange for all of the stock in

Newco, which includes common stock and non-voting preferred stock. D and Newco file a section 338(h)(10) election. D expects to recognize substantial tax losses with respect to the Business B assets held by T in connection with the contribution to Newco.

• D forms C and contributes all of the Newco common stock to C in exchange for all of the stock of C.

• D sells all of the Newco non-voting preferred stock to unrelated Investors.• D distributes all of the C stock to its shareholders (pro rata).

D

Newco

S CT

C Stock

Newco

Preferred Stock

Cash

Newco

Common Stock

T Stock

Newco Common/

Preferred Stock

Business A

Business B

(Built-in Losses)

21

(1)

C Stock

(2)

(3)

(4)Public

Investors

PLR 201203004

Rulings•D’s transfer of the T stock to Newco is a sale, Newco’s acquisition of T will be a “qualified stock purchase,” and D and Newco will be eligible to make a section 338(h)(10) election. Section 338(d)(3), (h)(3).

– The transaction is a “busted” section 351 exchange, and thus taxable, because of D’s sale of the Newco preferred stock. Section 338(h)(3)(A)(i), (ii).

– No attribution of ownership (section 318(a)) from D to Newco (section 338(h)(3)(A)(iii)), because relatedness is determined immediately after the spin-off of C. Treas. Reg. § 1.338-3(b)(3) (Stock acquired from a related corporation is generally not considered acquired by purchase).

– T recognizes built-in loss on deemed asset sale to New T. Treas. Reg. §§ 1.338(h)(10)-1(d)(2)-(4).

– T’s loss is taken into account immediately before the spin-off of C. Treas. Reg. §§ 1.267(f)-1(a)(2), 1.1502-13(d).

22

D

Newco

S

C

T

Business A

Business B

Public

Newco Preferred

Stock

Newco

Common

Stock

Investors

PLR 201203004

Rulings•D’s contribution to C and its distribution of the C stock qualify as a “D” reorganization.

– No gain or loss is recognized by D’s shareholders or D on the distribution of C stock. Sections 355, 361.

– D controls C under section 368(c); it does not matter that C does not control Newco.

– S’s Business A qualifies as D’s active trade or business (“ATB”), because S is a member of D’s separate affiliated group (“SAG”). Section 355(b)(3); Prop. Treas. Reg. § 1.355-3(b)(1)(ii).

– T’s Business B qualifies as C’s ATB (T is a member of C’s SAG). Section 355(b)(3); Notice 2007-60.

23

D

NewcoS

C

T

Business A

Business B

Public

Newco Preferred

Stock

Newco

Common

Stock

Investors

24

Section 304 and Qualified Stock Purchases

A

1. A owns all the stock of P and T.

2. A sells the T stock to P.

3. A is treated as if A transferred T stock to P for P Stock and then redeemed the stock it was treated as issuing.

4. P’s basis is determined by reference to A’s adjusted basis. Therefore, P is not considered to have acquired her stock by purchase.

P T

Actual Transaction

T Stock

Recharacterized Transaction

A

P

T

A

P T

Step 1 Step 2

P Stock

T Stock P Stock $

$

25

Reverse Subsidiary Mergers and QSPs

S P

T N

N Stock (1) P Forms N

(2) N Merges into T

1. P forms Newco (“N”) and contributes cash to N in exchange for N Stock.

2. N Merges into T, the T shareholder (S) receives cash for its T stock.

S P

T

$

26

Circular Ownership of T Stock

T

X

P

60%

100% 40%

$

T Stock

1. S owns 60% of T stock. X owns the remaining 40% of T stock.

2. P purchases the T stock held by S.

3. Has P made a QSP of T?

S

27

Effect of Post Acquisition Elimination of T

S P

T

T1

$

T Stock

1. On January 1, Year 1, P makes a QSP of T. On that date T owns the Stock of TI.

2. On March 1, Year 1, T sells the T1 stock to an unrelated corporation.

3. On April 1, Year 1, P makes a section 338 election for T.

$

T1 Stock

P

T

T1

X

28

Treatment of Nonrecently Purchased Stock

90%

S P

T

$900

100%

1. P purchases 90% of the T stock from S for $900.

2. The parties make a joint section 338(h)(10) election. What is the grossed-up basis of the T stock?

29

Treatment of Nonrecently Purchased Stock

80%

S P

T

$8,000,000

90%

1. P purchases 80% of the T stock from S within a 12 month period. P already holds 10% of the T stock with a basis of $200,000.

2. What is the grossed-up basis of the recently purchased stock and the nonrecently purchased stock?

10%$200,000 basis

30

Determination of ADSP -- Example 1

100%

S P

T

$80,000

100%

Asset Basis FMV

Land $50,000 $75,000Equipment $30,000 $60,000

Liability $40,000

1. What is the ADSP?

31

Determination of ADSP -- Example 2

80%

S P

T

$64,000

100%

Asset Basis FMV

Land $50,000 $75,000Equipment $30,000 $60,000

Liability $40,000

2. What is the ADSP?

32

Determination of ADSP -- Ex. 3: Unrelated Shareholder

80%

S P

T

$64,000

80%

Asset Basis FMV

Land $50,000 $75,000Equipment $30,000 $60,000

Liability $40,000

1. What is the impact on K?

K

20%

33

Determination of ADSP -- Example 4: Target Affiliate

100%

S P

T

$80,000

100%

Asset Basis FMV

Equipment $30,000 $60,000

Liability $40,000

Land $50,000 $75,000T1

34

Acquisition for Cash and Contingent Consideration

S P

TAsset Basis FMV

Equipment (Class V) $50 $75Goodwill (Class VII) $10 $?

What is the ADSP? How is it allocated?

T stock

$50 cash +$15 note +earnout

35

The Distribution of Unwanted Assets

S

T1 T

P

Bus 1 Bus 2

T stock

$

FactsCorporation S owns all the stock of Corporations T and T1. T operates businesses 1 and 2. Corporation P is unrelated to S. P wishes to acquireBusiness 1 but not any of the other assets owned by S.

Thus, before the effective date of the recently issued final regulations, the following transactions take place:• T adopts a plan of complete liquidation.• T distributes Business 2 to S.• S sells the T stock to P; S and P make a section 338(h)(10) election.

Questions

1. Does the sale of the T stock qualify for a section 338(h)(10) election?

2. What are the tax consequences of the distribution of Business 2 to S?

3. Does it matter when T’s plan of complete liquidation is adopted? What if T does not adopt a plan of complete liquidation?

Bus 2

36

The Distribution of Unwanted Assets Continued

S

T1 T

P

Bus 1

Bus 2

4. What would be the result if after the distribution by T of Business 2 to S and the stock sale by S, S transferred the Business 2 to T1? Would this affect the

deemed liquidation under section 338(h)(10)?

5. What would be the result if it were determined that the deemed liquidation was not in fact a complete liquidation?

6. What would be the result under the recently issued final regulations?

ReferencesTelephone Answering Service Co. v. Commissioner, 63 T.C. 423 (1974), aff’dwithout opinion, 546 F.2d 423 (4th Cir. 1976), cert. denied, 431 U.S. 914 (1977).Old Treas. Reg. § 1.338(h)(10)-1(e)(2)(ii)Treas. Reg. § 1.1502-13(j)(2)New Treas. Reg. § 1.338(h)(10)-1(d)(4)New Treas. Reg. § 1.338(h)(10)-1(e),Ex.2PLR 9738031, PLR 9735038, PLR 9210041, PLR 9137040, PLR 9044063, PLR 8938036, PLR 8821047

37

Application of Section 338(h)(10) to the Purchase of an Insolvent Corporation -- Insolvent Target Corporation

T Assets 1,000,000Liabilities 1,000,001

PT stock

$

Facts

Corporation T owns assets with a value of $1,000,000 and has liabilities of $1,000,001. P purchases all the stock of T from corporation S for $1 and attempts to make a section 338(h)(10) election with respect to T.

Questions

1. What are the results of this election?

2. Would the results be different under the recently issued final section 338 regulations?

ReferencesSection 338(h)(3)(A)Treas. Reg. § 1.332-2(b)New Treas. Reg. § 1.338-3(b)(2)Rev. Rul. 56-387, 1956-2 C.B. 189

S

38

Application of Section 338(h)(10) to the Purchase of an Insolvent Corporation -- Insolvent Target Subsidiary

T

T1

T3

T2

Assets 1,000,000Liabilities 900,000

Assets 10,000,000Liabilities 6,000,000

Assets 1,000,000Liabilities 1,000,001

Assets 100,000,000Liabilities 99,900,000

PS

T stock

$

39

Application of Section 338(h)(10) to the Purchase of an Insolvent Corporation -- Insolvent Target Subsidiary Continued

Facts

Corporation T owns assets with a value of $10 million and has liabilities of $6 million. Among the assets of T are all of the stock of T1 and T2. The assets of T1 have a value of $1 million and T1 has liabilities of $900,000. The assets of T2 have a value of $1 million and T2 has liabilities of $1,000,001. Among the assets of T2 is all of the stock of T3. The assets of T3 have a value of $100 million and T3 has liabilities of $99,900,000.

P purchases all the stock of T from S and attempts to join with S in a Section 338(h)(10) election with respect to T, T1, T2 and T3.

Questions

1. What are the results of this election under the old section 338 regulations?

2. Would the result in question 1 be different if T2 had no liabilities, but rather had outstanding both common and preferred stock, both held by T, with thepreferred stock having a liquidating preference of $1,100,000?

3. Would the results be different under the recently issued final section 338 regulations?

References

Section 338(h)(3)(A)Old Treas. Reg. § 1.338(h)(10)-1(e)(2)(ii)Treas. Reg. § 1.332-2(b)New Treas. Reg. § 1.338-3(b)(2)New Treas. Reg. § 1.338(h)(10)-1(d)(4)Rev. Rul. 56-387, 1956-2 C.B. 189Comm'r v. Spaulding Bakeries, Inc., 252 F2d 693 (2nd Cir. 1958)H.K. Porter Co. v. Comm'r, 87 TC 689 (1986).