Corporation Formation, Liquidation & Reorganization

Topics

June 1, 2007

How Debt Can Become Draconian Boot in a Sec. 351 Exchange

Editor: Mary Van Leuven, J.D., LL.M. Sec. 351 allows property to be transferred to a controlled corporation by one or more persons without gain or loss recognition. Example 1: Taxpayer A contributes a building (with a $1 million basis and $3 million fair market value (FMV)) to a new corporation

May 1, 2007

New Regs. Clarify Stock Distribution Requirement in Acquisitive D Reorganizations

Editor: Terence E. Kelly, CPA Partly to clarify the confusion caused by Letter Ruling 200551018 as to acquisitive D reorganizations (see Burton, Karlinsky and Wright, “S Corporations: Current Developments (Part II),” TTA, November 2006, p. 670), on Dec. 19, 2006, the IRS issued Temp. Regs. Sec. 1.368-2T(l), allowing transactions to

May 1, 2007

Acquisitive Transactions when Acquiring Corporation Issues No Stock

Temporary regulations (TD 9313; NPRM REG-157834-06, 3/1/07) clarify older temporary regulations (TD 9303, 12/18/06) by providing that the deemed issuance of a nominal share of stock of a transferee corporation in a transaction otherwise described in Sec. 368(a)(1)(D) (a D reorganization) does not apply if the transaction otherwise qualifies as

April 1, 2007

S Holding Companies and F Reorgs.

In yet another in a series of F reorganization rulings, the IRS issued Letter Ruling 200701017, holding that the formation of a new corporation, followed by the contribution of S stock and an immediate qualified subchapter S subsidiary (QSub) election, will be treated as an F reorganization (i.e., a mere

April 1, 2007

Final Basis Regs. Provide Deferral Opportunities in Tax-Free Exchanges

Co-Editors: Michael Metz, CPA; Nick Gruidl, CPA, MBT Final regulations addressing basis and boot in reorganizations provide interesting and unexpected results. Secs. 358 and 356 address allocation of basis to property received in a reorganization and gain recognition on receipt of boot, respectively. Proposed regulations (REG-116564-03, 5/3/04) provided a tracing