Corpz

Question 1

What is a split off?

Answer 1

1) Distributing corp transferred its biz assets to NEW controlled corp in exchange for stock of the controlled corp and
(2) Distributing corp distributed the stock of controlled corp to one of its shs

Question 2

What is a split up?

Answer 2

Distributing corp that owns 2 or more controlled corps. Here, we have Peanut Butter Corp and Jelly Corp that are entities. Then, the distributing corp exchanges the stock in one entity, Jelly, to one sh, A, in exchange for A’s distributing stock. Then, it distributes the stock of the other corp, Peanut Butter, to the other sh, in exchange for its distributing stock.

Aftermath: 1 sh owns the stock in 1 entity that conducts 1 business. The other sh owns the stock and the other entity that conducts a different business.

Question 3

What is a spin-off?

Answer 3

Corp has 2 lines of businesses that makes peanut butter and jelly. To DIVIDE businesses:

(1) Corp takes its Jelly business and contribute it to brand new entity, called controlled entity (Jelly entity) and
(2) Corp distributes controlled corp’s stock its 2 shs. Will now call og corp “distributing corp” since it’s distributing controlled corp’s stock.

Aftermath: The shs will own stock in controlled corp, which now conducts the jelly business and stock in distributing corp, which conducts the peanut butter business.

Question 4

What are the requirements for a forward triangular merger under 368(a)(2)(D)?

Answer 4

1. Req 1 - Subsidiary must acquire substantially all of target’s assets - 368(a)(2)(D)
2. Req 2 - No acquiror (subsidiary) stock can be used - 368(a)(2)(D)(i)
   - Sub using nonvoting preferred stock = violates this rule = NOT a good 368(a)(2)(D) transaction
3. Req 3 - Subsidiary must pay a bucket of consideration that has enough acquiror’s controlling parent’s stock that we would satisfy the continuity of interest test as though the target merged into controlling parent - 368(a)(2)(D)(ii)

Question 5

What can a forward triangular merger also be described as what kind of reorganization?

Answer 5

A C reorganization.

Question 6

What is a forward triangular merger?

Answer 6

Step 1: Parent transfers stock to new or existing subsidiary
Step 2: Target merges with subsidiary of parent and then target liquidates

For tax purposes: Target actually merged into acquiror sub, but PRETEND that target merged with subsidiary’s controlling parent corp

Question 7

What is a reverse triangular merger?

Answer 7

Step 1: Parent contributes stock to new subsidiary
Step 2: Subsidiary of parent merges with target corp and then subsidiary liquidates; target remains

For tax purposes: Target actually merged into acquiror sub, but PRETEND that target merged with subsidiary’s controlling parent corp

Question 8

What are the requirements for a B reorg?

Answer 8

1. Acquiror pays a bucket of consideration that consists SOLELY of acquiror voting stock for target’s stock
2. The acquiror controls target, which is enough to satisfy 368(c) control (80% voting stock and 80% non-voting stock). The target continues to exist. “

Question 9

What is a B reorg?

Answer 9

An acquisition of stock of the target corp in exchange solely for voting stock of the acquiring corporation, provided that the acquiring corporation has ““control”” (generally 80% ownership) of the target corp immediately after the transaction.

Question 10

What is a C reorg?

Answer 10

A C reorganization is governed by Section 368(a)(1)(C) of the Internal Revenue Code, and involves the acquisition of substantially all of the assets of one corporation by another corporation, in exchange for stock or securities of the acquiring corporation. In a C reorganization, the acquired corporation is generally liquidated, and its assets are transferred to the acquiring corporation without the recognition of gain or loss.