Thank You for the great Link - It further puts our doubt to rest- Common Shorts how you want to spin this!!
A “G” reorganization is defined “a transfer by a corporation (Sears) of all or part of its assets to another corporation (ESL) in a bankruptcy or similar case; but only if, in pursuance of the plan, stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 354 … ” (emphasis added). Tax code Section 354(b)(1) provides that Section 354(a) “shall not apply to an exchange in pursuance of a plan of reorganization within the meaning of … (G) of section 368(a)(1) unless—(A) the corporation to which the assets are transferred acquires substantially all of the assets of the transferor; and (B) the stock, securities, and other properties received by such transferor, as well as the other properties of such transferor, are distributed in pursuance of the plan of reorganization.”
Thus, for the instant transaction to qualify as a “G” reorganization, the requirements of Section 354 must be adhered to. These requirements will be met if (i) Buyer acquires substantially all of Sears’s assets (the Internal Revenue Service has ruled that, in the context of a “G” reorganization, substantially all of the assets means at least 50 percent of the fair market value of the transferor’s gross assets and at least 70 percent of the fair market value of such transferor’s operating assets); (ii) Sears liquidates in pursuance of the plan of reorganization, and (iii) at least one Sears shareholder receives ESL stock; or at least one security holder of Sears receives ESL stock or securities.
