Pervasip Corp (PVSP)

[Bjones2]

Tax Neutral

The manner in which a parent company structures the spinoff and divests itself of a subsidiary or division determines whether the spinoff is taxable or tax-free. The taxable status of a spinoff is governed by Internal Revenue Code (IRC) Section 355. The majority of spinoffs are tax-free, meeting the Section 355 requirements for tax exemption because the parent company and its shareholders do not recognize taxable capital gains.

Distributing shares in the spinoff in direct proposition to shareholders equity interest in the parent is what is happening.