Continuity of shareholder interest: back to the future

Article Abstract:

The IRS revised the continuity of shareholder interest requirement for certain tax-free reorganizations with the issuance of proposed regulations on Dec. 20, 1996. The revisions largely eliminate the post-transaction component of the requirement and make other taxpayer-favorable changes. The change is a return to the historical understanding of the continuity of interest requirement. The regulations also clarify that stock rights have no principal amount and therefore will not result in recognition of gain on the transaction.

Public Finance Activities, Corporate Tax Deductions & Exemptions, Corporate taxes, Stock rights, Stockholders' preemptive rights

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The cause & true effects of Code sec. 355(e)

Article Abstract:

IRC section 355(e) was enacted to eliminate perceived abuses in Morris Trust corporate reorganization transactions. Nonrecognition of gain is no longer allowed in transactions formally structured as Morris Trusts, regardless of the parties' intentions. The IRS-approved Viacom transaction underlies the legislative ban on all Morris Trust transactions. Section 355(e) is useful as a poison pill in some acquisition situations.

Mergers & Acquisitions, Tax-free exchanges

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Applying the property-services distinction in corporate transactions: the new economy tests the limits

Article Abstract:

The authors discuss gain or loss tax issues regarding the property-services distinction in corporate reorganizations under IRC sections 83 and 351.

United States, Property, Stock transfer, Taxation of services, Service taxes

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