AI
Tuesday, February 11, 2020 4:17:45 PM
Read this:
https://cohnekinghorn.com/wp-content/uploads/2019/01/1126_Tax_Aspects_of_Corporate_and_Business_Acquisitions_and_Dispositions_00163519.pdf";
Page 20/21
If you read POR 7 then one would know that between ALL reorganized WMI entities, including WMI, WMIIC and WMIH could merge and consolidate as they would see fit, without the need for consent or approval.
Because we are dealing with the event of a bankruptcy, ONLY type G reorganization is possible. As we can see in the table a reverse triangular merger is definitely possible!
WHICH IS DEFINITE PROOF THAT A REVERSE TRIANGULAR MERGER IS A POSSIBILITY EVEN WITH BANKRUPT ENTITIES, ESPECIALLY WHEN THE POR STATES THAT MERGERS AND CONSOLIDATIONS BETWEEN ALL ENTITIES NEW OR OLD CAN HAPPEN FREELY AND WITHOUT CONSENT OR APPROVAL
It also states that all assets need to be transferred to the Target Company. In this case the Target Company is WMIH, as described in my earlier post. This has happened IMO after the liquidation of Merger Sub WMIIC in 2017.
Also a reverse triangular merger must be treated as if a B-type reorganization. This means the acquirer, in this case former WMI, takes control! This would mean that first WMILT in 2017, after liquidation of WMIIC (The Merger Sub) and now former WMI inc is in control of WMIH/COOP and after the completion of the reverse triangular merger BECOMES THE PARENT OF COOP. And above that is in the position to distribute "special dividends" to legacy shareholders.
Why would they do this??
- Preservation of the NOL's!!! WMIH had to wait at least 3 years until 2018 after the KKR involvement in 2015 to not trigger an ownership change which would nullify the NOL's
- WMI LT did not have to pay dividends yet to legacy shareholders, and could liquidate a lot of MBS trusts assets without recognizing them on the books and records because THEY WERE NOT SOLD. All this is shielding the income streams from double taxation.
- Former WMI remains in control and retains contracts and income streams from MBS trusts.
- Because it is written in POR 7 that merging and consolidation could happen without consent or approval everything could be done "in the dark".
Ask yourself this:
Why would WMIH need to reincorporate in the same state (Delaware) as WMILT, unless they had to merge with eachother?
Also interesting stuff:
page 8
"Liquidating Trusts. If the corporation has actual or contingent
obligations to be covered by maintaining a reserve fund, or has unsold assets not easily
distributable in kind, then a liquidating trust may be useful in order to obtain liquidation
treatment by distributing the reserve and remaining assets into trust for the benefit of
shareholders. The key is that the trust must be recognized as such and not treated as an
association taxable as a corporation. See Regs. § 301.7701-4(d). This may allow the avoidance
of dividend treatment to the shareholders, permit the recognition of loss to the corporation on the
distribution of the unsold remaining assets, and avoid double taxation on transactions made by
the trust itself."
WMILT did not need to recognize remaining assets, unless their are sold! Also when WMILT was active it could avoid dividend treatment, while WMIH/COOP could wait for suitable candidates after the 3 year ownership change period.
Page 9 (I believe this to pertain to WMI owning more than 80% of the stock of WMIIC):
(3) 80% Subsidiaries. If a stockholder is a corporation owning 80% or
more of the voting power and value of the stock of the liquidating corporation at all times from
the time of the adoption of a plan of complete liquidation until the actual liquidating distribution,
then under IRC § 332, the shareholder will not recognize gain or loss on receipt of a distribution
pursuant to the liquidation. Rather, it receives a carryover basis in the assets received (IRC §
334(b)(1)) and will succeed to certain tax attributes of the liquidated corporation (IRC § 381).
Also, the liquidating subsidiary will not recognize gain or loss on the distribution in kind of
assets to its parent (the subsidiary will, of course, recognize gain on assets sold to a third party
including where it distributes the cash proceeds to its parent). IRC § 337.
https://cohnekinghorn.com/wp-content/uploads/2019/01/1126_Tax_Aspects_of_Corporate_and_Business_Acquisitions_and_Dispositions_00163519.pdf";
Page 20/21
If you read POR 7 then one would know that between ALL reorganized WMI entities, including WMI, WMIIC and WMIH could merge and consolidate as they would see fit, without the need for consent or approval.
Because we are dealing with the event of a bankruptcy, ONLY type G reorganization is possible. As we can see in the table a reverse triangular merger is definitely possible!
WHICH IS DEFINITE PROOF THAT A REVERSE TRIANGULAR MERGER IS A POSSIBILITY EVEN WITH BANKRUPT ENTITIES, ESPECIALLY WHEN THE POR STATES THAT MERGERS AND CONSOLIDATIONS BETWEEN ALL ENTITIES NEW OR OLD CAN HAPPEN FREELY AND WITHOUT CONSENT OR APPROVAL
It also states that all assets need to be transferred to the Target Company. In this case the Target Company is WMIH, as described in my earlier post. This has happened IMO after the liquidation of Merger Sub WMIIC in 2017.
Also a reverse triangular merger must be treated as if a B-type reorganization. This means the acquirer, in this case former WMI, takes control! This would mean that first WMILT in 2017, after liquidation of WMIIC (The Merger Sub) and now former WMI inc is in control of WMIH/COOP and after the completion of the reverse triangular merger BECOMES THE PARENT OF COOP. And above that is in the position to distribute "special dividends" to legacy shareholders.
Why would they do this??
- Preservation of the NOL's!!! WMIH had to wait at least 3 years until 2018 after the KKR involvement in 2015 to not trigger an ownership change which would nullify the NOL's
- WMI LT did not have to pay dividends yet to legacy shareholders, and could liquidate a lot of MBS trusts assets without recognizing them on the books and records because THEY WERE NOT SOLD. All this is shielding the income streams from double taxation.
- Former WMI remains in control and retains contracts and income streams from MBS trusts.
- Because it is written in POR 7 that merging and consolidation could happen without consent or approval everything could be done "in the dark".
Ask yourself this:
Why would WMIH need to reincorporate in the same state (Delaware) as WMILT, unless they had to merge with eachother?
Also interesting stuff:
page 8
"Liquidating Trusts. If the corporation has actual or contingent
obligations to be covered by maintaining a reserve fund, or has unsold assets not easily
distributable in kind, then a liquidating trust may be useful in order to obtain liquidation
treatment by distributing the reserve and remaining assets into trust for the benefit of
shareholders. The key is that the trust must be recognized as such and not treated as an
association taxable as a corporation. See Regs. § 301.7701-4(d). This may allow the avoidance
of dividend treatment to the shareholders, permit the recognition of loss to the corporation on the
distribution of the unsold remaining assets, and avoid double taxation on transactions made by
the trust itself."
WMILT did not need to recognize remaining assets, unless their are sold! Also when WMILT was active it could avoid dividend treatment, while WMIH/COOP could wait for suitable candidates after the 3 year ownership change period.
Page 9 (I believe this to pertain to WMI owning more than 80% of the stock of WMIIC):
(3) 80% Subsidiaries. If a stockholder is a corporation owning 80% or
more of the voting power and value of the stock of the liquidating corporation at all times from
the time of the adoption of a plan of complete liquidation until the actual liquidating distribution,
then under IRC § 332, the shareholder will not recognize gain or loss on receipt of a distribution
pursuant to the liquidation. Rather, it receives a carryover basis in the assets received (IRC §
334(b)(1)) and will succeed to certain tax attributes of the liquidated corporation (IRC § 381).
Also, the liquidating subsidiary will not recognize gain or loss on the distribution in kind of
assets to its parent (the subsidiary will, of course, recognize gain on assets sold to a third party
including where it distributes the cash proceeds to its parent). IRC § 337.
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