Notes On Tax Deferred Reorganizations Essay

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J. Tax Deferred Reorganizations
Tax Deferred Reorganizations which are commonly referred to as “tax free” reorganizations provide an alternative with regard to purchasing entities using stock as the acquisition currency.
Internal Revenue Code (IRC) Section 368 contains the provisions for tax free reorganizations which defer the gain recognition in specified corporate acquisitions. Partnerships generally do not fall under these provisions. Generally, only the first three types or a variation of them are used in most acquisitions. Reorganizations are very complex with detailed rules to adhere to that ensures their tax free treatment. The items below address some not all of the basics for certain reorganizations.
The types of reorganizations under IRC 368 include:
“A” reorganizations – Statutory merger or consolidation.
“B” reorganizations – Stock for stock exchange.
“C” reorganizations – Stock for asset acquisition
“D” reorganizations – target transfers all or part of its assets to the Acquirer and after the transfer the target is in control of the Acquirer.
“E” reorganizations – Corporate recapitalizations.
“F” reorganizations – Mere change in name, form or place of organization of the corporation.
“G” reorganizations – Transfer by target to an Acquirer in title 11 bankruptcy. “Tax-free” transactions, which are actually tax deferred transactions, are considered “reorganizations” and are similar to taxable transactions except that in reorganizations the acquirer uses its
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