Former IRS Chief Offers New Tax Guidance on Corporate Reorganizations
Last update: 6/23/2009 10:02:00 AM
ARLINGTON, Va., June 23, 2009 /PRNewswire-USNewswire via COMTEX/ --
The corporate reorganization provisions of the US Internal Revenue Code accord tax-free treatment to certain corporate combinations and realignments.
How a corporation can qualify for tax-free treatment when it is reorganized is the subject of Single Entity Reorganizations: Recapitalizations and F Reorganizations, written by attorney and PricewaterhouseCoopers partner Michael Kliegman, former Group Chief of the Reorganization Branch of the Office of Chief Counsel, IRS.
Kliegman analyzes the tax consequences of two types of tax-free corporate reorganizations involving a single company: recapitalization under Section 368(a)(1)(E) and a change in identity, form, or place of organization under Section 368(a)(1)(F).
Identifying common uses of single-entity reorganizations, this new Portfolio (#774-3 in the U.S. Income Portfolio Series) discusses E and F reorganizations both separately and in relation to one another and to the other types of reorganizations under Section 368. The analysis discusses the business purpose requirements and basic tax consequences -- including the treatment of the corporations involved and their shareholders and security holders -- for each. Author Michael Kliegman explores the consequences of various recapitalization transactions and compares transactions technically qualifying under Section 368(a)(1)(E) with transactions that, though possibly not qualifying, are commonly referred to as recapitalizations.
In addition, he explains the purpose and effect of the 1982 statutory amendment to the F reorganization regulation limiting the provision to transactions involving a single corporation, and distinguishes the F reorganization reincorporation transaction from multi-party reorganizations. Single Entity Reorganizations addresses topics including cross-border F reorganizations, mutual-to-stock conversions, Section 305, Section 306 stock, and estate freeze recapitalizations. Reporting requirements under Sections 368, 6043(c), and 6043A are also included.
"The current economic climate has focused attention on single-entity reorganizations by compelling many corporations to recapitalize and restructure," says BNA tax analyst Allen Calhoun.
"Of particular importance to struggling businesses in the current crisis are the section 108(i) election to defer cancellation of indebtedness income from a debt-for-debt exchange in debt restructurings; this portfolio discusses the election and its consequences in the single-entity reorganization context," adds Calhoun.
Other significant changes over the past five years in single-entity reorganization law discussed in detail in this portfolio include
- clarification of continuity of interest and continuity of business enterprise,
- the treatment of transaction costs,
- cross-border "F" reorganizations,
- mutual-to-stock conversions, and
- new and proposed reporting requirements.
Michael J. Kliegman is a practicing attorney with PricewaterhouseCoopers LLP in New York. He is a member of the tax sections of the American Bar Association and the New York State Bar Association.
About BNA Tax & Accounting
BNA Tax & Accounting is the foremost source of news, analysis, and practice tools for tax attorneys, estate planners, accountants, and corporate tax and financial accounting professionals. For more than 50 years, BNA Tax & Accounting has offered practitioners expert insights and guidance on every significant issue in tax planning and financial accounting. Written by practitioners for practitioners, BNA's award-winning Portfolios offer topic-driven, in-depth guidance on transactions designed to help tax professionals achieve new levels of excellence and client service. Visit BNA Tax & Accounting online at .
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