Year of Award
Master of Science in Taxation (MST)
College of Business & Professional Studies
liability, corporation, transaction, shareholders, board
Historically transactions are tax free if the assets exchanged are of a like—kind. The taxation of corporate reorganizations has evolved out of case law. Code Section 368 describes tax free reorganizations. It is important to understand the tax rules in order to maintain the taxpayers tax position.
To keep an "A" reorganization from becoming a "C" reorganization the transaction must comply with the laws of incorporation. A corporate merger or consolidation is authorized by the state under a plan not related to taxation. The plan required by the Internal Revenue Service. An "A" reorganization is defined as a statutory merger or address tax free exchanges. In a merger, two or more corporations surviving. In a consolidation two or more corporations combine to form a new corporation. A transaction is tax free when the consideration in the exchange consists of ownership evidenced by stock. Other forms of consideration may be used such as cash, property and debt. These are described as boot and are taxable. Using too large a quantity of other consideration may cause the transaction to be taxable under the continuity of interest requirement which requires a certain percent of ownership to be maintained in the transaction. Noncompliance with the continuity of interest requirement will not create "C" reorganization. However, the transaction will then be completely taxable. An "A" and "C" reorganization overlap enough to cause a shift in type of reorganization when there is a change in the consideration or shift in the assets.
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Rosenberg, Earl A., "How to Keep an "A" Reorganization from Becoming a "C" Reorganization" (1993). Theses, Dissertations, and Capstone Projects. 266.
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