C12-Chp-07-1B-Div-Reorgs-Attributes-etc-2012

C12-Chp-07-1B-Div-Reorgs-Attributes-etc-2012 - Chapter 7B....

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1 Chapter 7B. Corporate Reorganizations C9-Chp-07-1B-Div-Reorgs-Attributes-etc-2009 Edited February 14, 2009 Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright Howard Godfrey, 2009.
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2 Divisive Reorganizations. A divisive reorg. involves the transfer of part of a transferor corporation's assets to a controlled corporation in exchange for its stock and securities (and possibly some boot). The stock and securities are then distributed to the transferor's shareholder(s). Divisive reorgs are usually Type D reorgs, but may be Type G reorgs if accomplished in connection with a bankruptcy or other restructuring.
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3 Divisive Reorganizations. Type D Divisive Reorganization. A Type D reorg. must take place as part of a plan of reorg. and satisfy the requirements of Secs. 368(a)(1)(D) and 355. There are three forms of Type D reorganization: spin-offs, split-offs, and split-ups.
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4 Please use C9-Chp-07-5B-Divisive Reorg-Ruth and Pat.xls When working solving the problems in the slides in this file.
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5 Divisive Reorganizations. 1. Asset Transfer. Transferor corp. recognizes no gain or loss on the asset transfer, except when boot is received and retained. 2. Gain or loss may be recognized under Sec. 357(c) by the transferor when liabilities in excess of the basis of the property transferred are assumed by the transferee. 3. No gain or loss is recognized by the controlled corp. when it exchanges its stock for the transferor corp's property. 4. Transferor corp's basis and holding period for the property carry over to the controlled corp.
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6 Divisive Reorganizations. 5. Distribution of Stock and Securities. No gain or loss is recognized by the transferor corp. when it distributes controlled corp's stock or securities to its shareholders. Gain may be recognized if boot property is distributed to shareholder. Shareholders recognize no gain or loss on receipt of the stock or securities, except to when they receive boot. 6. Basis of the stock or securities received equals the basis of the stock or securities surrendered, increased by any gain recognized and reduced by money and the FMV of any other boot property received. 7. Holding period includes the holding period of the stock or securities surrendered. Example C7-25.
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7 Divisive Reorganizations. Distribution of Stock and Securities. …………. a. Sec. 355 Requirements. Sec. 355 requirements must be met in order for the distribution of a subsidiary's stock as part of a Type D reorganization or as an independent event to be tax-free.
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8 We will use the information on the following slides for Local Corporation to illustrate divisive reorganizations.
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$50,000 Pat's basis: $50,000 $300,000 Ruth and Pat are not related. Ruth owns 50% of Local Corp.
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C12-Chp-07-1B-Div-Reorgs-Attributes-etc-2012 - Chapter 7B....

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