Formation, Liquidation & Reorganization
Tax-free corporate reorganizations, or divisions, can be achieved with split-ups, splitoffs, and spinoffs. A consideration of the reason for the corporate division should guide the determination of which technique would be most beneficial.
The IRS announced that it is reviewing its approach to the active trade or business requirement that must be met for a five-year period for a business to qualify for a tax-free spinoff under Sec. 355 and, as a result, is suspending two revenue rulings, Rev. Ruls. 57-464 and 57-492, in which it previously ruled on the topic.
This article discusses several key factors that CPAs and benefit plan advisers should consider to help successfully integrate plans during a merger or acquisition.
The transaction accomplishes a distribution of assets to the parent, which may be effected in a tax-free manner only in limited circumstances.
Provisions relating to the repeal of the General Utilities doctrine may again face scrutiny.
In some circumstances, a taxable stock sale may make more sense.
Because there is no clear statutory guidance for how a bankruptcy judge determines if a trustee’s request to apply substantive consolidation should be granted, each case is different.
Meeting the active trade or business requirement is critical to ensuring a corporation leasing farmland qualifies for a tax-free divisive reorganization.
The IRS is introducing an 18-month pilot program under which it will once again issue letter rulings concerning the general income tax effects of stock distributions under Sec. 355.
The IRS ruled on how the distribution of stock is treated in a tax-free reorganization and whether there is any potential recognition of gain.
The IRS withdrew rules it proposed in 2005 that would have required certain corporate formations and reorganizations to meet net value requirements before they would qualify for nonrecognition treatment.
The IRS is introducing an 18-month pilot program under which it will once again issue letter rulings concerning the general income tax effects of stock distributions under Sec. 355.
The IRS says it will again issue rulings on corporate leveraged spinoff transactions.
The IRS withdrew rules it proposed in 2005 that would have required certain corporate formations and reorganizations to meet net value requirements before they would qualify for nonrecognition treatment.
The House Blueprint, if enacted, may provide incentives for certain taxpayers to merge in the future.
The IRS says it will again issue rulings on corporate leveraged spinoff transactions.
The proposed regulations are intended to further limit a corporation’s ability to separate business assets from nonbusiness assets in a tax-free manner.
Carrying over E&P from one entity to another and administrative burdens can lead to
headaches down the road.
The tension between the two principles of the new regulations can cause taxpayers uncertainty.
The application of the business purpose and device rules often involves both legal and factual questions.
