Treasury and IRS announce that certain “cash rich” and REIT/RIC conversion spin-offs are under study and are added to the “no rule” list.

On September 14, 2015, the United States Treasury Department (the Treasury) and the United States Internal Revenue Service (the IRS) issued Notice 2015-59 (the Notice) in which they announced that certain types of spin-offs involving relatively substantial investment assets, relatively small active businesses and conversions into real estate investment trusts (REITs) or regulated investment companies (RICs) are under study and may raise concerns under the various requirements of Section 355, which governs the tax-free status of spin-off transactions. The IRS also issued Revenue Procedure 2015-43, pursuant to which these types of spins were added to the “no-rule” lists so that, depending on the nature of the transaction, the IRS will either ordinarily not issue rulings on such spins absent unique and compelling reasons or will temporarily not issue rulings regardless of the circumstances pending the outcome of the study.