Spin-offs and leverage

Article Abstract:

Cash transfers in the form of loans between parent corporations and subsidiaries made prior to spin-offs which result in separating the entities should not in most cases cause IRC section 355 spin-offs to be taxable. Six requirements or tests under this section must be met to avoid realization of gain. Not meeting the devise test is the cause of taxability and not the method of funding by debt cancellation, cash balances, or new debt.

Corporate Taxes, Laws, regulations and rules, Dividends, Capital gains tax

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Convertible debt: conversion as a bargain purchase

Article Abstract:

The holder's exercise of a conversion right adhering to a convertible debt instrument should be considered a purchase/sale with no corresponding capital gain or loss. The instrument's issuer would recognize the gain or loss under this theory. Tax-free exercise of conversion privileges would ensure all debenture conversions into stock, including the exercise of either conversion rights or options, would receive the same tax treatment.

Debt equity conversion, Convertible bonds

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Corporate combining transactions

Article Abstract:

Corporate combinations designed to eliminate stock gain include downstream or upstream mergers, inversions, triangular reorganizations, and creeping transactions. These corporate combining transactions may create tax problems under the regulations governing IRC Section 337(d). The IRS must consider the pros and cons of recognizing gain or loss in combining transactions in creating guidelines to address these problems.

Acquisitions and mergers

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