Corporate Reorganizations

Question 1

What are the two forms of a corporate reorg?

Answer 1

Two corps form into one

One corp spins off another corp

Question 2

What are a A and C reorg?

Answer 2

Stock for asset reorg

Acquiring CORP provides stock to Target in return Acquiring gets all the asset (tax-free)

Both a tax free

Question 3

What is a B Reorg?

Answer 3

Stock for Stock

Question 4

What is a D Reorg?

Answer 4

One corp becomes two

Question 5

What is a A Reorg?

Answer 5

• Known as a statutory merger
• Target has to dissolve
• Acquiring can give voting or non-voting
• At least 50% of the consideration given must be stock, the remaining can be assets, etc.

Question 6

Define the characteristics of a B Reorg?

Answer 6

• Stock for Stock
• Acquiring must own at least 80% of Target after transaction
• Only VOTING stock can be used by Acquiring
• No boot is allowed (anything other than qualified stock)

Question 7

Define the characteristics of a C Corp?

Answer 7

Stock for asset

Does not have to be a statutory merger

Only VOTING can be used

Boot is allowed but it cannot exceed 20%

Acquiring must substantially acquire all of Targets assets (90% of net asset value and 70% of gross asset value)

Question 8

If you meet the requirements for a reorganization, what is the tax consequence?

Answer 8

No gain or loss to the extent of boot received

Recognized gain is lower of

• Boot received
• Realized gain

Question 9

What happens if the acquiring corp transfers appreciated property to the target company?

Answer 9

A gain (but not loss) will be recognized

Question 10

What basis will the shareholders have in the stock received for target shareholders?

Answer 10

Basis of stock surrendered
+ Gain recognized
- Boot received

Question 11

What will be the basis of the transferor’s basis in the asset?

Answer 11

Transfer basis in asset

+ Gain recognized by shareholder