Contingent liabilities in section 351 transactions: the IRS limits the application of Holdcroft
Article Abstract:
The IRS ruled in Revenue Ruling 95-74 that contingent environmental liabilities assumed by a newly formed wholly owned subsidiary in a IRC section 351 reorganization are deductible as business expenses or can be treated as capital expenditures. The IRS also found that the liabilities should not be treated as section 357(c) liabilities and the parent company's basis in stock in the subsidiary does not need to be adjusted. The IRS did not expressly state that this ruling overturns the position in Holdcroft Transportation Co. v. Commissioner but the two rulings are incompatible.
Publication Name: Journal of Corporate Taxation
Subject: Law
ISSN: 0094-0593
Year: 1996
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Float like a deemed butterfly ... reflections on the significance of meaninglessness in a "B" reorganization
Article Abstract:
Capital contribution transfers between wholly-owned foreign subsidiaries of a US parent corporation may avoid IRC section 367(a) taxation through application of the meaningless gesture doctrine and recharacterization as a deemed B reorganization. The issuance of additional stock in the wholly-owned subsidiary that receives the transfer is meaningless because the US parent recognizes no gain. The IRS has been unwilling to apply more favorable B reorganization treatment to any outbound transaction deemed meaningful.
Publication Name: Journal of Corporate Taxation
Subject: Law
ISSN: 0094-0593
Year: 1996
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Sidestepping the business purpose test for corporate spin-offs
Article Abstract:
Corporations planning spin-offs should be aware of how such transactions can be made tax-free by getting around the business purpose requirement of IRC Section 355. This requirement restricts tax-free status to spin-offs intended to mitigate adverse business conditions and not simply to evade paying taxes on earnings and profits. However, corporations can satisfy Section 355 and escape tax liability by carefully documenting that the spin-off was the only way possible to attain a strictly business-related goal.
Publication Name: Journal of Corporate Taxation
Subject: Law
ISSN: 0094-0593
Year: 1993
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