before and after the acquisition and distribution...." Thus, the shareholders must own the requisite interest in both the acquiring
corporation and either the distributing or controlled corporation (whichever is not acquired).
Part of the problem in separating identifiable intangible assets from goodwill arises because imprecise tax definitions of goodwill focus on customer patronage, which can include almost anything related to acquiring
and keeping customers.
Between those two alternatives for retroactive treatment, we believe the better approach is to apply the new rules retroactively and permit an election for acquiring
or controlling corporations to elect under "old" rules relating to remote continuity of interest.
269(a), because it was a carryover-basis transaction and the parent (who had no direct or indirect interest in the acquiring
subsidiary before the transaction) acquired control of at least 50% of the acquiring
The Third Circuit and First Circuit, respectively, reasoned that in a stock-for-stock transaction in which control is achieved, the acquiring
corporation may exchange no consideration other than voting stock to effect a tax-free, B-type reorganization.
88-48, 1988-1 CB 117, concluded that the "substantially all" requirement was met in a C reorganization when the target sold 50% of its historic assets and transferred the sales proceeds and its other properties to the acquiring
Other special rules also are provided for higher-tier adjustments and subsequent distributions by the acquiring
member out of earnings and profits acquired from the former common parent.
The Target group collectively owned less than 80% of the stock in Acquiring
, a company engaged in Businesses B and C.
The Final Regulations now provide that the acquisition of a target's stock for consideration other than solely an acquiring
corporation's voting stock only in connection with a QSP does not prevent the subsequent transfer of the target's assets to the acquiring
corporation from qualifying as a C reorganization (the QSP-solely-for-voting stock (SFVS) exception); see Regs.
Prior to the recent promulgation of the overlap rule, when Acquiring
was a member of a consolidated group that acquired the assets of a nonmember Target in a tax-free asset acquisition, the absorption of the Target losses was subject to a SRLY limit, computed with reference to Acquiring
's contribution to consolidated taxable income.
Further, the taxpayer and the EAT will agree to report the Federal income tax consequences of acquiring
, holding and disposing of the property consistent with the procedure.
Commentators argued that the temporary regulations were too broad and should instead have been based on the "solely for voting stock" requirement: Pre-reorganization redemptions and extraordinary distributions by a target should not be taken into account for COI purposes, unless an acquiring
corporation directly or indirectly furnishes the consideration for the redemption or distribution.