Liability assumptions in spinoff transactions

Article Abstract:

The tax treatment of liability assumption in corporate spin-offs under IRC sections 355 and 357 is relatively settled, but Congress is considering revising these provisions based on a perception that the tax-free treatment is being abused. It has been particularly clear that liability assumptions are not going to call into question the valid non-tax purpose for a transaction in the section 355 context. The Commissioner v. Waterman Steamship Corp. case, the Viacom-TCI transaction and other major spin-offs are discussed.

Public Finance Activities, Corporate Income Taxes, Corporate reorganizations, Tax exemption, Tax exemptions

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Federal Circuit rules that allocation of earnings and profits in intra-group spin-off does not support increased basis

Article Abstract:

The 1997 Federal Circuit decision in IU International Corp. properly holds that, in a spinoff, stock basis cannot be increased by earnings/profits allocated or adjusted under the consolidated return rules. The case concerned an intra-group spinoff done prior to the adoption of the 1994 regs delinking stock basis and earnings/profits adjustments.

Basis (Taxation)

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Is managing a partnership an active trade or business?

Article Abstract:

The author discusses IRS private letter rulings addressing the question of whether a corporation that is a partner in a partnership can meet the active trade or business requirement of s. 355 of the Internal Revenue Code for purposes of tax-free corporate division.

United States, Partnership, Partnerships

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