Editor: Frank J. O’Connell Jr., CPA, Esq. On May 8, 2008, the IRS issued Rev. Rul. 2008-25 to clarify the application of the step-transaction doctrine to situations in which an acquiring corporation (P) acquires a target corporation (T) by means of a reverse subsidiary merger followed immediately by a liquidation
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Formation, Liquidation & Reorganization
Letter Ruling Reaffirms Favorable Treatment for Sale of Charter
Editor: Frank J. O’Connell Jr., CPA, Esq. Disposing of a valuable corporate charter is not as simple as a straight sale of the asset and can have unintended tax consequences if not properly structured. Corporations in certain regulated industries such as insurance or banking may have to jump through some
IRS Issues Final “Killer B” Regs.
The IRS issued regulations to shut down cross-border triangular reorganizations, popularly known as “Killer B” transactions
The “Substantially All” Requirement: A Momentary Concept
New final regulations, generally applicable to transactions occurring on or after October 25, 2007, significantly expand the range of permissible post-reorganization transfers.
Traps for the Unwary: Rollovers and the Sec. 338 Election
This item focuses on how to structure the transaction when one or more S corporation shareholders wish to roll over their S corporation investment. If structured incorrectly, a rollover can render a Sec. 338(h)(10) election unavailable.
Debt Discharge in Corporate Recapitalizations: Avoiding Surprises
Recapitalizations in which corporate debt is restructured or discharged are assuming a new prominence in the current economy.
Maximizing the Benefits of Sec. 199 in an Asset Sale
This article addresses the opportunity to claim a Sec. 199 deduction when a business is sold in an asset sale or in a stock sale that is treated as an asset sale under a Sec. 338(h)(10) election.
Sec. 382 Ownership and Fluctuation in Value
For a corporation with more than one class of stock, the effects stock price fluctuations can play a significant role in determining whether use of the NOLs could become limited as a result of trading and other equity shifts.
Assumption of Liabilities in Taxable Asset and Sec. 338(h)(10) Acquisitions
One cannot assume that the tax treatment of liabilities will conform with financial reporting, and with stricter FIN 48 and Sec. 6694 standards it is more important than ever that tax advisers get it right.
Restricted Stock in Acquisitions: IRS Provides Much-Needed Guidance
Rev. Rul. 2007-49 provides valuable guidance in determining whether Sec. 83 applies to the receipt of restricted stock in taxable and tax-free reorganizations. However, many questions remain unanswered.
Final Regs. Issued on Corporate Reorganizations
The IRS has issued final regulations that provide guidance regarding the effect of certain transfers of assets or stock on the continuing qualification of transactions as reorganizations under Sec. 368(a).
Significant Recent Corporate Developments
This article summarizes selected income tax developments during the past year affecting corporations, including those that file consolidated returns.
Deductibility of Nonqualified Deferred Compensation in Mergers and Acquisitions
Editor: Frank J. O’Connell, Jr., CPA, Esq Determining the tax treatment and timing of an employer corporation’s deduction for amounts paid under nonqualified deferred-compensation arrangements under Sec. 404 can be a daunting task, depending on the circumstances. Even if such arrangements have not triggered any of the pitfalls in Sec.
Transfers to Investment Companies: Pitfalls of Secs. 351 and 721
Editor: Anthony S. Bakale, CPA, M.Tax. In many instances, property can be contributed to an entity by its owners in exchange for ownership interests, without gain or loss being recognized on the contribution. For corporations, the general rule under Sec. 351(a) is that “no gain or loss shall be recognized
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
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
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
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
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
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.
