Corp 2
David Fine
ACC641- corp tax 2
Chapter 7
Intro
* Just like companies are able to be created tax free, corporations are given the ability to restructure and reorganize as long as they follow the code rules * Since the reorganizations are usually substantial, the tax implication can be significant * The taxable gain for a shareholder is likely to be treated as either a dividend or a capital gain. * These tax classifications are less then the rates for ordinary income * If gains are divendend to the corp then they will be divs for the shareholders * If it is classified as a capital gain for the corp then shareholders will be taxed at their marginal rates * Since implications can be large, corps should ask the IRS if their reorg will have a tax treatment, if they rule in their favor then the org will proceed.
7.1 REORGANIZATIONS- IN GENERAL
* reorganization for tax purposes does not only corps that are in financial trouble, but also those that want to restructure * section 388 cover tax free reorganizations * three general rules a corp must pass along with section 388: * 1. There must be a plan of reorganization * 2. The reorganization must meet the continuity of interest and the continuity of business enterprise tests provided in the regulations * 3. The court-imposed step transaction doctrine should not apply to reorganization * SUMMARY OF THE DIFFERENT TYPES OF REORGANIZATIONS * A a statutory merger or consolidation * B the acquisition by a corporation of another using solely stock of each corp * C the acquisition by a corporation of substantially all of the property of another coorp in exchange for voting stock * D the transfer of all or part of a corp’s assets to another corp when the original corps shareholders are in control of the new corp immediately after transfer * E a recapitalization * F a mere change in identity,
ACC641- corp tax 2
Chapter 7
Intro
* Just like companies are able to be created tax free, corporations are given the ability to restructure and reorganize as long as they follow the code rules * Since the reorganizations are usually substantial, the tax implication can be significant * The taxable gain for a shareholder is likely to be treated as either a dividend or a capital gain. * These tax classifications are less then the rates for ordinary income * If gains are divendend to the corp then they will be divs for the shareholders * If it is classified as a capital gain for the corp then shareholders will be taxed at their marginal rates * Since implications can be large, corps should ask the IRS if their reorg will have a tax treatment, if they rule in their favor then the org will proceed.
7.1 REORGANIZATIONS- IN GENERAL
* reorganization for tax purposes does not only corps that are in financial trouble, but also those that want to restructure * section 388 cover tax free reorganizations * three general rules a corp must pass along with section 388: * 1. There must be a plan of reorganization * 2. The reorganization must meet the continuity of interest and the continuity of business enterprise tests provided in the regulations * 3. The court-imposed step transaction doctrine should not apply to reorganization * SUMMARY OF THE DIFFERENT TYPES OF REORGANIZATIONS * A a statutory merger or consolidation * B the acquisition by a corporation of another using solely stock of each corp * C the acquisition by a corporation of substantially all of the property of another coorp in exchange for voting stock * D the transfer of all or part of a corp’s assets to another corp when the original corps shareholders are in control of the new corp immediately after transfer * E a recapitalization * F a mere change in identity,