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TAX-FREE CORPORATE REORGANIZATIONS
Tax attribute survival is often a critical consideration in assessing a proposed corporate reorganization. Beneficial tax attributes, such as net operating losses, earnings and profits, and capital losses, are often involved, and the speed at which reorganizations tend to move makes a good foundational understanding of the relevant rules crucial for practitioners assisting taxpayers with reorganizations.
Under IRC § 381 (a), the tax attribute carryover rules apply to any transaction to which IRC § 361 applies. Section 361(a) states that no gain or loss to a corporation will be recognized if that corporation is a party to a reorganization and exchanges property solely for stock of another corporation involved in the reorganization. Section 381(a)(2) states that five of the seven types of reorganization are potentially eligible to use the attribute carryover rules. However, divisive type D reorganizations and type G reorganizations that are not acquisitive, as well as...