reorg outline

reorg outline - Corporate Tax II Weisbach 2009 I. Taxable...

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Corporate Tax II – Weisbach 2009 I. Taxable Acquisitions A. Asset Purchases 1. 2 levels of tax – asset sale + liquidation a. Forward Merger – T mergers into Acq sub i. Rev. Ruling 69-6: where Acq sub is formed for purpose of merger & T s/hs get cash, transitory existence of Acq sub is disregarded and transaction is treated as an asset sale 2. Intangibles, §197: permits amortization of intangible assets over 15 year period 3. Purchase Price Allocation, Regs. §1.338-6: (see slide 5) B. Stock Purchases 1. 1 level of tax, carryover basis a. Reverse Merger – Acq sub mergers into T 2. Historical Treatment – Kimbell-Diamond : step trans makes stock purchase + liquidation = asset purchase; eventually repealed by statute 3. Current Treatment of Stock Purchases, §338 – if corp makes “Qualified Stock Purchase” it may elect to qualify for either asset or stock purchase treatment a. Qualified Stock Purchase (QSP), Requirements and Consequences i. P must make taxable purchase of 80% of value and vote of T w/in 12 month period ii. Election must be made no later than 9.5 months from QSP iii. In QSP, “Old T” treated as selling assets to “New T” and liquidating into P one day after stock purchase and outside of any consolidated returns b. §338(h)(10): If S & T eligible to file consolidated return, then P & S may make joint election to treat stock purchase as an asset sale c. §336(e): if corp owns 80% of vote/value of sub & owner sells, exchanges or distributes stock (Qualified Stock Disposition, QSD), election may be made to treat the disposition as a disposition of assets w/ no gain/loss recognized with respect to stock d. Rev Ruling 90-95 : where P created transitory acquisition sub to acquire T in reverse subsidiary cash merger; i. Situation 1: creation of acquisition sub is disregarded, and merger is treated as QSP ii. Situation 2: subsequent liquidation of T is given independent significance and does not result in QSP being recast as asset purchase; step trans turned off and trans treated as stock purchase + liquidation a. Rationale: Congress intended to completely repeal Kimbell-Diamond by enacting §338, thus §338 election principles control 4. Sale/Redemption: where subsidiary borrows and distributes cash to s/h after a merger, distribution is treated as a redemption to be analyzed under §302 II. Corporate Reorganizations A. Reorganization Checklist 1. Determine the type of reorg and check requirements 2. If stock/assets has been transferred check -2(k) 3. Make sure entities involved are “parties to the reorganization” under -2(f) B. Statutory Forms 1. “A” Reorganizations, §368(a)(1)(A) a. Requirements i. Merger or consolidation a. Rev. Rul 2000-5 : where T transfers only half of assets to P and continues to exist, or where T transfers half of assets to each of two purchasers, such transfers are not mergers b/c merger contemplates T ceasing to exist and divisive mergers only dealt with in §355 ii. Continuity of interest (COI)
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This note was uploaded on 10/18/2011 for the course LAW 123 taught by Professor Curtis during the Spring '11 term at USC.

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reorg outline - Corporate Tax II Weisbach 2009 I. Taxable...

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