Corp Income Tax II Outline

Corp Income Tax II Outline - Lectures 1 & 2 -...

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Unformatted text preview: Lectures 1 & 2 - Introduction In order to have a tax reportable event, you have to have Realization & Recognition TR 1.1001-1(a) – gain/loss is realized from exchange of property differing materially in kind or extent. Under §1001, if you realize gain, you have to recognize it unless there is an exception. This course is all about an exception to recognition - §§354 to 368 (subchapter C) Tax-free reorgs are a form of nontaxable exchange. No gain or loss is recognized to the security holders of the various corporations involved in a tax-free reorg in exchange for the stock or securities (exchange represents a mere change in form of S/H interest in the business). If they receive other property (boot), gain is recognized to the extent of the lesser of the gain realized or the boot received. For SHs, the gain can be dividend income to the extent of E&P, then capital gain. If the SH can show that the redemption qualifies on § 302, all of the gain is capital. Debt holders recognized capital gain to the extent the principal amount of the securities is greater than the principal amount of the securities given up. Gain or loss generally is not recognized to the corporations involved in reorganization. Exceptions: (1) A target fails to distribute other property or its own appreciated property to its shareholders and (2) acquiring corporation recognizes gain or loss when it transfers non-cash boot to the target shareholders . Types of Tax Free Reorganizations § 368 (a)(1)(A) Type A - Statutory Merger (Statutory Merger or Consolidation) § 368 (a)(1)(B) Type B - Stock for Stock (Exchange of Voting Stock for Stock) § 368 (a)(1)(C) Type C - Stock for Assets (Exchange of Assets for Voting Stock) § 368 (a)(1)(D) Type D - Divisive Exchange (spin-off, split-off, split-up) § 368 (a)(1)(E) Type E - Recapitalizations § 368 (a)(1)(F) Type F - Mere Change in Identity, Form, or Place of Organization § 368 (a)(1)(G) Type G – Bankruptcy Reorganizations § 368 (a)(2)(C) Permits Drop Downs – Type A, B, and C reorganizations will remain tax-free even if acquired stock or assets are dropped down into a controlled subsidiary. Type A, B & C reorgs are acquisitive reorganizations. When P acquires stock (B reorg) or assets (C reorg) of T and T gets stock in consideration from P, treat as if P stock went to T and T distributed the stock to its shareholders Acquisitive organizations are transactions in which one corporation (the acquiring corporation) acquires the assets or stock of another corporation (the target corporation). 1 st thing you want to ask is it an asset acquisition or a stock acquisition. If it is stock, it is a B. If it is statutory merger then A, if not it is a C. Four Basic Taypes of Reorgs: (1) Asset Acquisitions - §368(a)(1)(A) & (C) (2) Stock Acquisitions – B Reorgs (3) Reverse Triangular Mergers (4) One-Party Transactions (recaps, F reorgs, divisive reorgs) What does it take to have a Tax-Free Reorganization?...
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This note was uploaded on 04/16/2008 for the course TAX 850-12 taught by Professor Solomon during the Spring '07 term at Georgetown.

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Corp Income Tax II Outline - Lectures 1 & 2 -...

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