Chapter 7Chapter 7
Corporations: Reorganizations
Corporations: Reorganizations
Copyright ©2008 South-Western/Thomson LearningCopyright ©2008 South-Western/Thomson LearningCopyright ©2008 South-Western/Thomson LearningCopyright ©2008 South-Western/Thomson Learning
Corporations, Partnerships,Corporations, Partnerships,Estates & TrustsEstates & Trusts
Corporations, Partnerships,Corporations, Partnerships,Estates & TrustsEstates & Trusts
C7 - 2Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Reorganizations—In GeneralReorganizations—In General
• Refers to any corporate restructuring that may be tax-free under §368– To qualify, must meet certain general
requirements:• Must be a plan of reorganization• Must meet continuity of interest and continuity of
business enterprise tests• Must have a sound business purpose• Tax-free status can be denied under step transaction
doctrine
• Refers to any corporate restructuring that may be tax-free under §368– To qualify, must meet certain general
requirements:• Must be a plan of reorganization• Must meet continuity of interest and continuity of
business enterprise tests• Must have a sound business purpose• Tax-free status can be denied under step transaction
doctrine
C7 - 3Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Summary of Different Types of Reorganizations
Summary of Different Types of Reorganizations
• The term reorganization includes:– Statutory merger or consolidation
– Stock for stock exchange
– Stock for assets exchange
– Divisive exchange
– Recapitalization
– Change in identity, form, or place of organization
– Transfers in bankruptcy or receivership
• The term reorganization includes:– Statutory merger or consolidation
– Stock for stock exchange
– Stock for assets exchange
– Divisive exchange
– Recapitalization
– Change in identity, form, or place of organization
– Transfers in bankruptcy or receivership
C7 - 4Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Tax Free Reorganization Consequences, in General (slide 1 of 3)
Tax Free Reorganization Consequences, in General (slide 1 of 3)
• Consequences to Acquiring Corporation– No gain or loss recognized unless it transfers
property to the Target corporation as part of the transaction
• Then gain, but not loss, may be recognized
– Basis of property received retains basis it had in hands of Target corp plus any gain recognized by the target
• Consequences to Acquiring Corporation– No gain or loss recognized unless it transfers
property to the Target corporation as part of the transaction
• Then gain, but not loss, may be recognized
– Basis of property received retains basis it had in hands of Target corp plus any gain recognized by the target
C7 - 5Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Tax Free Reorganization Consequences, in General (slide 2 of 3)
Tax Free Reorganization Consequences, in General (slide 2 of 3)
• Consequences to Target Corporation– No gain or loss unless it retains “other
property” received in the exchange or it distributes its own property to shareholders
• Other property is defined as anything received other than stock or securities
– Treated as boot
• Gain, but not loss, may be recognized
• Consequences to Target Corporation– No gain or loss unless it retains “other
property” received in the exchange or it distributes its own property to shareholders
• Other property is defined as anything received other than stock or securities
– Treated as boot
• Gain, but not loss, may be recognized
C7 - 6Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Tax Free Reorganization Consequences, in General (slide 3 of 3)
Tax Free Reorganization Consequences, in General (slide 3 of 3)
• Consequences to Target or Acquiring Co. Shareholders– No gain or loss unless shareholders receive
cash or other property in addition to stock• Cash or other property is considered boot
– Gain recognized by the stockholder is the lesser of the boot received or the realized gain
– Basis of shares received is same as basis of those surrendered, decreased by boot received, increased by gain and dividend income, if any, recognized in the transaction
• Consequences to Target or Acquiring Co. Shareholders– No gain or loss unless shareholders receive
cash or other property in addition to stock• Cash or other property is considered boot
– Gain recognized by the stockholder is the lesser of the boot received or the realized gain
– Basis of shares received is same as basis of those surrendered, decreased by boot received, increased by gain and dividend income, if any, recognized in the transaction
C7 - 7Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type A ReorganizationType A Reorganization
• Includes mergers and consolidations– Merger is union of two or more corporations
• One corporation retains it existence and absorbs the others
– Consolidation occurs when a new corporation is created to take the place of two or more corporations
• Includes mergers and consolidations– Merger is union of two or more corporations
• One corporation retains it existence and absorbs the others
– Consolidation occurs when a new corporation is created to take the place of two or more corporations
C7 - 8Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type A Reorganization (slide 1 of 2)Type A Reorganization (slide 1 of 2)
C7 - 9Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type A Reorganization (slide 2 of 2)Type A Reorganization (slide 2 of 2)
C7 - 10Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type A Reorganization Issues(slide 1 of 2)
Type A Reorganization Issues(slide 1 of 2)
• Advantages:– Type A reorganization is flexible– Consideration need not be voting stock– Money or other property can be transferred
without disqualifying the transaction, as long as “continuity of interest” is met (at least 50% of consideration used in reorganization must be stock)
• Advantages:– Type A reorganization is flexible– Consideration need not be voting stock– Money or other property can be transferred
without disqualifying the transaction, as long as “continuity of interest” is met (at least 50% of consideration used in reorganization must be stock)
C7 - 11Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type A Reorganization Issues (slide 2 of 2)
Type A Reorganization Issues (slide 2 of 2)
• Disadvantages:– Money or other property transferred is “boot”
so some gain may be required to be recognized– Shareholders of either entity may dissent; in
most states their shares must be redeemed– Acquiring entity must assume all liabilities of
Target
• Disadvantages:– Money or other property transferred is “boot”
so some gain may be required to be recognized– Shareholders of either entity may dissent; in
most states their shares must be redeemed– Acquiring entity must assume all liabilities of
Target
C7 - 12Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type B Reorganization (Stock-for-Stock Reorganization)
Type B Reorganization (Stock-for-Stock Reorganization)
C7 - 13Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type B Reorganization Requirements (slide 1 of 4)
Type B Reorganization Requirements (slide 1 of 4)
• Corporation acquires stock of Target solely in exchange for its own voting stock (stock for stock)– Acquiring corporation must acquire “control”
of Target• Control is ownership of at least 80% of all classes of
stock of target
• Acquirer may add shares owned previously with shares acquired in reorganization
• Corporation acquires stock of Target solely in exchange for its own voting stock (stock for stock)– Acquiring corporation must acquire “control”
of Target• Control is ownership of at least 80% of all classes of
stock of target
• Acquirer may add shares owned previously with shares acquired in reorganization
C7 - 14Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type B Reorganization Requirements (slide 2 of 4)
Type B Reorganization Requirements (slide 2 of 4)
• Acquiring corporation may acquire shares from either:(1) Shareholders of Target, or(2) Directly from Target
• Exception to the “solely for voting stock” requirement when shareholders must receive fractional shares– May receive cash rather than fractional shares
in the acquiring corporation
• Acquiring corporation may acquire shares from either:(1) Shareholders of Target, or(2) Directly from Target
• Exception to the “solely for voting stock” requirement when shareholders must receive fractional shares– May receive cash rather than fractional shares
in the acquiring corporation
C7 - 15Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type B Reorganization Requirements (slide 3 of 4)
Type B Reorganization Requirements (slide 3 of 4)
• Example: Assume Target has 100 shares outstanding:– Acquirer may obtain 80 shares from current
Target shareholders in exchange for Acquirer’s voting stock
– Target may also issue 400 new shares to Acquirer in exchange for Acquirer’s voting stock (500 shares would be outstanding)
• Example: Assume Target has 100 shares outstanding:– Acquirer may obtain 80 shares from current
Target shareholders in exchange for Acquirer’s voting stock
– Target may also issue 400 new shares to Acquirer in exchange for Acquirer’s voting stock (500 shares would be outstanding)
C7 - 16Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type B Reorganization Requirements (slide 4 of 4)
Type B Reorganization Requirements (slide 4 of 4)
• Consideration paid by Acquirer can only include Acquirer’s voting stock or transaction does not qualify
• Consideration paid by Acquirer can only include Acquirer’s voting stock or transaction does not qualify
C7 - 17Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type C Reorganization (Stock-for-Assets Reorganization)
Type C Reorganization (Stock-for-Assets Reorganization)
C7 - 18Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type C Reorganization Requirements (slide 1 of 3)
Type C Reorganization Requirements (slide 1 of 3)
• A ‘‘Type C’’ reorganization is essentially an exchange of voting stock for assets followed by liquidation of the target corporation– Called a “Stock-for-Assets” reorganization– Transfer is generally between the entities, not
the shareholders
• A ‘‘Type C’’ reorganization is essentially an exchange of voting stock for assets followed by liquidation of the target corporation– Called a “Stock-for-Assets” reorganization– Transfer is generally between the entities, not
the shareholders
C7 - 19Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type C Reorganization Requirements (slide 2 of 3)
Type C Reorganization Requirements (slide 2 of 3)
• Consideration paid by Acquirer normally consists only of voting stock– However, if at least 80% of FMV of Target is
acquired with voting stock, cash or other property can be used for remainder
– Limitation: liabilities assumed by Acquirer are considered “other property” if any additional “other property” is used
• Consideration paid by Acquirer normally consists only of voting stock– However, if at least 80% of FMV of Target is
acquired with voting stock, cash or other property can be used for remainder
– Limitation: liabilities assumed by Acquirer are considered “other property” if any additional “other property” is used
C7 - 20Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type C Reorganization Requirements (slide 3 of 3)
Type C Reorganization Requirements (slide 3 of 3)
• “Substantially all” of Target’s assets must be transferred to Acquirer
• There is no statutory definition of ‘‘substantially all’’– To receive a favorable ruling from the IRS, the
target must transfer at least 90% of net asset value or 70% of the gross asset value to the acquiring corporation
• “Substantially all” of Target’s assets must be transferred to Acquirer
• There is no statutory definition of ‘‘substantially all’’– To receive a favorable ruling from the IRS, the
target must transfer at least 90% of net asset value or 70% of the gross asset value to the acquiring corporation
C7 - 21Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization (slide 1 of 4)
Type D Reorganization (slide 1 of 4)
• Generally a mechanism for corporate division– Called a “divisive reorganization” but can be
used to carry out a corporate combination– In a Type D acquisitive reorganization
• Entity transferring assets is considered the acquiring corporation
• Corporation receiving the property is the target
• Generally a mechanism for corporate division– Called a “divisive reorganization” but can be
used to carry out a corporate combination– In a Type D acquisitive reorganization
• Entity transferring assets is considered the acquiring corporation
• Corporation receiving the property is the target
C7 - 22Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization (slide 2 of 4)
Type D Reorganization (slide 2 of 4)
• In an acquisitive Type D reorganization– Substantially all of acquiring corp’s property
must be transferred to target corporation– The acquiring corp must be in control (at least
50%) of the target– Target stock received by the acquiring corp and
any remaining assets of acquiring corp must be distributed to its shareholders
– Acquiring corporation must liquidate
• In an acquisitive Type D reorganization– Substantially all of acquiring corp’s property
must be transferred to target corporation– The acquiring corp must be in control (at least
50%) of the target– Target stock received by the acquiring corp and
any remaining assets of acquiring corp must be distributed to its shareholders
– Acquiring corporation must liquidate
C7 - 23Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization (slide 3 of 4)
Type D Reorganization (slide 3 of 4)
• In a divisive Type D reorganization– A corporation is divided– One or more new corps are formed to receive
assets of original corp– Original corp must receive stock representing
control (80%) of new corps– Stock of new corps is then distributed to
shareholders of original corp
• In a divisive Type D reorganization– A corporation is divided– One or more new corps are formed to receive
assets of original corp– Original corp must receive stock representing
control (80%) of new corps– Stock of new corps is then distributed to
shareholders of original corp
C7 - 24Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization (slide 4 of 4)
Type D Reorganization (slide 4 of 4)
• Three types of divisive “Type D” reorganizations– Spin-Off and Split-Off
• A new corporation is formed to receive some of the assets of the original corporation in exchange for the new corporation's stock
– Split-Up• Two or more corporations are formed to receive
substantially all of the assets of the original corporation
• Three types of divisive “Type D” reorganizations– Spin-Off and Split-Off
• A new corporation is formed to receive some of the assets of the original corporation in exchange for the new corporation's stock
– Split-Up• Two or more corporations are formed to receive
substantially all of the assets of the original corporation
C7 - 25Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D ReorganizationSpin-Off (slide 1 of 2)
Type D ReorganizationSpin-Off (slide 1 of 2)
C7 - 26Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D ReorganizationSpin-Off (slide 2 of 2)
Type D ReorganizationSpin-Off (slide 2 of 2)
C7 - 27Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization Split-Off (slide 1 of 2)
Type D Reorganization Split-Off (slide 1 of 2)
C7 - 28Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization Split-Off (slide 2 of 2)
Type D Reorganization Split-Off (slide 2 of 2)
C7 - 29Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization Split-Up (slide 1 of 2)
Type D Reorganization Split-Up (slide 1 of 2)
C7 - 30Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type D Reorganization Split-Up (slide 2 of 2)
Type D Reorganization Split-Up (slide 2 of 2)
C7 - 31Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type E Reorganization (slide 1 of 2)
Type E Reorganization (slide 1 of 2)
• Type E reorganization is a recapitalization– Involves a major change in character and
amount of outstanding stock, securities, or paid-in-capital
• The following exchanges qualify: – Bonds for stock– Stock for stock– Bonds for bonds
• Type E reorganization is a recapitalization– Involves a major change in character and
amount of outstanding stock, securities, or paid-in-capital
• The following exchanges qualify: – Bonds for stock– Stock for stock– Bonds for bonds
C7 - 32Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type E Reorganization (slide 2 of 2)
Type E Reorganization (slide 2 of 2)
• Corporation can exchange its common stock for preferred stock or its preferred stock for common stock tax-free– The exchange of bonds for other bonds is tax-
free when the debt received has a principal amount that is not more than the surrendered debt’s principal amount
• Corporation can exchange its common stock for preferred stock or its preferred stock for common stock tax-free– The exchange of bonds for other bonds is tax-
free when the debt received has a principal amount that is not more than the surrendered debt’s principal amount
C7 - 33Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type F ReorganizationType F Reorganization
• A mere change in identity, form, or place of organization, however effected– Restricted to a single operating corporation– Tax characteristics of predecessor corp carry
over to successor corp– Does not jeopardize status of §1244 stock or
terminate a valid S corp election
• A mere change in identity, form, or place of organization, however effected– Restricted to a single operating corporation– Tax characteristics of predecessor corp carry
over to successor corp– Does not jeopardize status of §1244 stock or
terminate a valid S corp election
C7 - 34Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type G ReorganizationType G Reorganization
• All or part of assets of debtor corp are transferred to an acquiring corp in bankruptcy – Debtor corp’s creditors must receive voting
stock of the acquiring corp in exchange for debt representing 80% or more of total FMV of debt of debtor corp
• All or part of assets of debtor corp are transferred to an acquiring corp in bankruptcy – Debtor corp’s creditors must receive voting
stock of the acquiring corp in exchange for debt representing 80% or more of total FMV of debt of debtor corp
C7 - 35Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Judicial Doctrines (slide 1 of 2)Judicial Doctrines (slide 1 of 2)
• Besides meeting specific requirements of reorganization, several judicially created doctrines must be met – Reorganization must exhibit a sound business purpose
• Not a well defined test
– Continuity of interest test• IRS deems this test met if shareholders of Target receive stock
in Acquirer equal to at least 50% of their prior stock ownership in Target stock
• Besides meeting specific requirements of reorganization, several judicially created doctrines must be met – Reorganization must exhibit a sound business purpose
• Not a well defined test
– Continuity of interest test• IRS deems this test met if shareholders of Target receive stock
in Acquirer equal to at least 50% of their prior stock ownership in Target stock
C7 - 36Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Judicial Doctrines (slide 2 of 2)Judicial Doctrines (slide 2 of 2)
– Continuity of business enterprise test• Requires the acquiring corp to either:
– Continue the Target’s historic business, or
– Use a significant portion of Target’s assets in business
– Step transaction doctrine• Ensures that a series of transactions are not used to obtain tax
benefits that would be unavailable if the transaction were accomplished in a single step
• IRS generally views any transactions occurring within one year of reorganization as part of the restructuring
– Continuity of business enterprise test• Requires the acquiring corp to either:
– Continue the Target’s historic business, or
– Use a significant portion of Target’s assets in business
– Step transaction doctrine• Ensures that a series of transactions are not used to obtain tax
benefits that would be unavailable if the transaction were accomplished in a single step
• IRS generally views any transactions occurring within one year of reorganization as part of the restructuring
C7 - 37Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Carryover of Corporate Tax Attributes (slide 1 of 4)
Carryover of Corporate Tax Attributes (slide 1 of 4)
• Assumption of liabilities– Acquiring corp either assumes liabilities of
Target or takes property subject to liabilities
• Allowance of Carryovers– In Type A, C, acquisitive D, and G
reorganizations, the Target’s tax attributes are acquired
– In Type B reorganizations, Target retains its assets and tax attributes
• Assumption of liabilities– Acquiring corp either assumes liabilities of
Target or takes property subject to liabilities
• Allowance of Carryovers– In Type A, C, acquisitive D, and G
reorganizations, the Target’s tax attributes are acquired
– In Type B reorganizations, Target retains its assets and tax attributes
C7 - 38Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Carryover of Corporate Tax Attributes (slide 2 of 4)
Carryover of Corporate Tax Attributes (slide 2 of 4)
• NOL Carryovers– Amount of NOL that can be used in year
ownership change occurs is limited to a percentage representing the remaining days in the tax year over the total number of days in the year
• NOL Carryovers– Amount of NOL that can be used in year
ownership change occurs is limited to a percentage representing the remaining days in the tax year over the total number of days in the year
C7 - 39Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Carryover of Corporate Tax Attributes (slide 3 of 4)
Carryover of Corporate Tax Attributes (slide 3 of 4)
• NOL Carryovers (cont’d)– NOL can be further limited in first and succeeding
years when there is a more than 50-percentage-point ownership change
• An ownership change takes place on the day (change date) that either an equity structure shift or an owner shift occurs
– An equity structure shift occurs when a tax-free reorganization causes an owner shift
– An owner shift is any change in the common stock ownership of shareholders owning at least 5%
– NOL can be used to the extent of the value of the loss corp’s stock on the date of the ownership change multiplied by the long-term tax-exempt rate
• NOL Carryovers (cont’d)– NOL can be further limited in first and succeeding
years when there is a more than 50-percentage-point ownership change
• An ownership change takes place on the day (change date) that either an equity structure shift or an owner shift occurs
– An equity structure shift occurs when a tax-free reorganization causes an owner shift
– An owner shift is any change in the common stock ownership of shareholders owning at least 5%
– NOL can be used to the extent of the value of the loss corp’s stock on the date of the ownership change multiplied by the long-term tax-exempt rate
C7 - 40Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Carryover of Corporate Tax Attributes (slide 4 of 4)
Carryover of Corporate Tax Attributes (slide 4 of 4)
• Earnings and Profits– Positive E & P of acquired corp carries over– E & P of a deficit corp are deemed received by
acquiring corp as of change date • Deficit may only be used to offset E & P
accumulated by successor corporation after the change date
• Earnings and Profits– Positive E & P of acquired corp carries over– E & P of a deficit corp are deemed received by
acquiring corp as of change date • Deficit may only be used to offset E & P
accumulated by successor corporation after the change date
C7 - 41Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Type Advantages Disadvantages
A. Merger/ Consolidation
Consideration need not be voting stock
State law may give dissenters rights or require s/holder mtgs.
Up to 50% of consideration can be in cash
All liabilities of Target are assumed by Acquirer
Type Advantages Disadvantages
A. Merger/ Consolidation
Consideration need not be voting stock
State law may give dissenters rights or require s/holder mtgs.
Up to 50% of consideration can be in cash
All liabilities of Target are assumed by Acquirer
Comparison of Reorganization Types (slide 1 of 5)
Comparison of Reorganization Types (slide 1 of 5)
C7 - 42Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Comparison of Reorganization Types (slide 2 of 5)
Comparison of Reorganization Types (slide 2 of 5)
Type Advantages Disadvantages
B. Stock-for- Stock
Stock can be acq’d from shareholders
Only voting stock of Acquirer can be used
Procedures are not complex
Must have 80% control of Target -May have minority after reorg.
Type Advantages Disadvantages
B. Stock-for- Stock
Stock can be acq’d from shareholders
Only voting stock of Acquirer can be used
Procedures are not complex
Must have 80% control of Target -May have minority after reorg.
C7 - 43Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Comparison of Reorganization Types (slide 3 of 5)
Comparison of Reorganization Types (slide 3 of 5)
Type Advantages Disadvantages
C. Stock-for-Assets
Less complex as to state law than “A”
“Substantially all” assets of Target must be transferred
Cash or property are OK consideration if 20% or less of FMV of property transferred
Liabilities count as “other property” for 20% test if any other consideration used. Target must distribute assets rec’d to s/holders
Type Advantages Disadvantages
C. Stock-for-Assets
Less complex as to state law than “A”
“Substantially all” assets of Target must be transferred
Cash or property are OK consideration if 20% or less of FMV of property transferred
Liabilities count as “other property” for 20% test if any other consideration used. Target must distribute assets rec’d to s/holders
C7 - 44Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Comparison of Reorganization Types (slide 4 of 5)
Comparison of Reorganization Types (slide 4 of 5)
Type Advantages
D. Division (generally)
Permits corporate division without tax consequences if no boot is involved
E. Recapitalization Allows for major change in makeup of shareholders’ equity without gain recognition requirement
Type Advantages
D. Division (generally)
Permits corporate division without tax consequences if no boot is involved
E. Recapitalization Allows for major change in makeup of shareholders’ equity without gain recognition requirement
C7 - 45Corporations, Partnerships, Estates & TrustsCorporations, Partnerships, Estates & Trusts
Comparison of Reorganization Types (slide 5 of 5)
Comparison of Reorganization Types (slide 5 of 5)
Type Advantages
F. Change in form, identity, or place of organization
Survivor is treated as same entity as predecessor; tax attributes of predecessor can be carried back or forward
G. Court approved reorganization
Creditors can exchange notes for stock tax-free and state merger laws need not be followed
Type Advantages
F. Change in form, identity, or place of organization
Survivor is treated as same entity as predecessor; tax attributes of predecessor can be carried back or forward
G. Court approved reorganization
Creditors can exchange notes for stock tax-free and state merger laws need not be followed