Clearing the deck of Waterman Steamship: pre-reorganization dividends and assumption of shareholder debt

Article Abstract:

Commissioner v. Waterman Steamship Corp in 1970 and subsequent cases continue to affect the taxation of corporate stock reorganizations that feature pre-acquisition dividends. These cases allowed presale distributions to be included with the acquisition price and with the distributee-seller's gain from the acquisition. Changes in income tax rules in 1979 restricted these distributions by mandating that consolidated subsidiaries use negative basis adjustment. However, the Waterman Steamship structures are still viable in many cases and should be considered when planning a reorganization.

Cases, Corporation law, Corporate reorganizations

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Contributions to capital under section 108(e)(6): the last frontier

Article Abstract:

The contribution of corporate debt exception to the cancellation of indebtedness income rules has become increasingly valuable in light of the narrowing of the stock-for-debt exception. Under IRC section 108(e)(6), debtor corporations acquiring corporate debt from a shareholder as a contribution to capital will not be subject to cancellation of indebtedness income on that contribution. Since non-pro rata contributions are allowable under these rules, section 108(e)(6) transactions can also be used to shift interests among minority shareholders.

United States, Extinguishment of debts, Debt cancellation, Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation)

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Filling in the gaps: new proposed and temporary regs clarify bankruptcy loss carryforward rules

Article Abstract:

The proposed and temporary regulations under Section 382 of the Internal Revenue Code favor taxpayers that are undergoing capital-structure reorganizations. These regulations fill in the gaps left by the Bankruptcy Code and the IRC. The Proposed Regulations deal with the issue of whether loss corporations can treat indebtedness as 'qualified indebtedness.' The Temporary Regulations defer the ownership change of a bankrupt loss corporation until the bankruptcy court confirms the reorganization plan.

Carryforward losses, Carryover losses

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