Immune Pharmaceuticals Inc (fka IMNPQ)

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6. Transaction Must Not Amount to a Distribution of Disqualified Stock

A spin-off may be considered a disqualified distribution if any person holds “disqualified stock” in either the distributing or the controlled corporation and such stock represents a fifty percent or greater interest in such a corporation. For these purposes, the term “fifty percent or greater interest” is defined as stock possessing at least fifty percent of the total combined voting power of all classes of stock entitled to vote or at least fifty percent of the total value of shares of all classes of stock. See IRC Section 335(d).

The term “disqualified stock” is defined as 1) any stock in the distributing corporation that was acquired by purchase during the five-year period ending on the date of the distribution, or 2) any stock in the controlled corporation acquired by purchase at any time during the five-year period ending on the date of the distribution or received in the distribution to the extent attributable to the distribution on any stock of the distributing corporation by purchase during the five-year period. The regulations provide three exceptions to the above general rule: 1) an acquisition of stock in a corporation in exchange for an 80 percent stock interest in another corporation; 2) cash transferred as part of an active trade or business; and 3) transfers between members of the same affiliated group. See Treas. Reg. Section 1.355-6(d)(3)(iii)-(v).