The IRS issued final regulations intended to clarify and simplify rules concerning continuity of accounting methods and inventory methods in certain tax-free corporate reorganizations and liquidations.
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Formation, Liquidation & Reorganization
One Reorganization, Two Tax Years, One Practical Solution
This item considers what is the proper time to report the transaction if a reorganization spans different tax years.
IRS Matching Program for Forms 8023 and 8883 May Result in Invalid Sec. 338 Election
The IRS recently launched a program to match the filing of Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases, by a foreign purchasing corporation acquiring a foreign target, with Form 8883, Asset Allocation Statement Under Section 338, to report the effect of the Sec. 338 election.
New “Killer B” Regulations Issued
The IRS has issued new final regulations on cross-border reverse triangular reorganizations, popularly known as “Killer B” transactions.
A Trap for the Unwary in the COI Regs.
Vagueness about how long the stock of the acquiring corporation had to be retained after the acquisition led to a significant change to the continuity of interest regulations in 1998, which eliminated the requirement that the stock of the acquiring corporation be retained post-acquisition.
Significant Recent Corporate Developments
This article summarizes selected recent developments in federal income taxation of corporations and shareholders.
Reorganizations and Tax Attribute Survival
Whether tax attributes will survive corporate tax reorganizations often becomes a critical consideration in assessing the ramifications of a proposed transaction. This item discusses issues surrounding these reorganizations and emphasizes the need for practitioners to have a good foundational understanding of the relevant rules.
Dismissal of Tax-Driven Bankruptcy Plan Affirmed
The Seventh Circuit affirmed a bankruptcy court’s refusal to confirm a bankruptcy plan and its dismissal of the bankruptcy proceeding because the principal purpose was to avoid taxes. The court said the filing was in bad faith and did not serve the proper purpose of bankruptcy law.
Meeting the Applicable Corporate Reorganization Reporting Requirements
The reorganization provisions of the Internal Revenue Code, located primarily in Secs. 354, 355, and 368, allow a variety of tax-free transactions in the form of combinations, divisions, and recapitalizations. It is extremely important to document that the correct procedures have been followed.
The Step-Transaction Doctrine, QSPs, and Tax-Free Reorgs.
Rev. Rul. 2008-25 expands on existing rulings with respect to the application of the step-transaction doctrine within the context of qualified stock purchases and tax-free reorganizations. The ruling provides a succinct yet comprehensive analysis that sheds light on the combined application of the predecessor rulings.
Pretransaction Restructuring Using an F Reorg.
This item explains how, within the context of a subchapter S corporation target, a Sec. 368(a)(1)(F) reorganization private letter ruling may present a structure that allows the parties to a reorganization to have their cake and eat it, too.
Consequences of S Corporation Termination in a Reorganization
An S corporation can participate as a corporate entity in a corporate reorganization; this leads to a substantive advantage of S corporations over partnerships
Final Regs. on Cash D Reorgs.
The IRS published final regulations addressing the qualification and treatment of certain acquisitive transactions as reorganizations under Sec. 368(a)(1)(D) where no stock or securities of the acquiring corporation are issued in the transaction (cash D reorganizations).
Significant Recent Corporate Developments
This article discusses selected developments in U.S. federal income taxation of corporations and consolidated groups during 2009.
Determining Basis in Tax-Free Acquisitions
Mergers and acquisitions are often a significant component of the growth strategies for many companies. CPAs who support these activities can help acquiring companies decide whether to buy the assets of the target corporation or acquire its stock.
Should a Company Elect to Defer Cancellation of Debt?
The American Recovery and Reinvestment Act of 2009 provides certain business debtors with a cancellation of debt (COD) income deferral election under new Sec. 108(i) for reacquisitions by the debtor or by certain related parties of applicable debt instruments after December 31, 2008, and before January 1, 2011.
New Continuity-of-Interest Regs. Expand Definition of Qualifying Stock Recipients in a Reorg.
Treasury recently finalized regulations, effective for transactions occurring after December 12, 2008, for applying the continuity-of-interest (COI) requirement to insolvent corporations (T.D. 9434).
Update on Determinations of Target Stock Basis in B Reorgs.
In Notice 2009-4, the IRS has proposed to amplify the methods available to an acquiring corporation (Acquiring) to estimate basis in the stock of a target corporation (Target) received in tax-free reorganizations under Sec. 368(a)(1)(B) (a B reorganization), as well as to expand the use of such methods to certain other tax-free transactions.
Regulations Eliminate “Hot Stock” Rule for Certain Reorgs.
The IRS issued regulations that generally hold that the so-called hot stock rule is inapplicable in reorganizations where a subsidiary is a member of the distributing corporation’s separate affiliated group.
Lenders Allowed Nonrecognition Treatment for Certain Securities Loans Terminated Due to Bankruptcy
Rev. Proc. 2008-63 permits securities lenders continued nonrecognition treatment under Sec. 1058(a) for certain securities loans terminated due to the bankruptcy of the securities borrower, provided the lender applies the collateral to the purchase of identical securities within 30 days of the default.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
