- 10 - (D) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor, or one or more of its shareholders (including persons who were shareholders immediately before the transfer), or any combination thereof, is in control of the corporation to which the assets are transferred; but only if, in pursuance of the plan, stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 354, 355, or 356; * * * The above-described transaction, commonly referred to as a “D” reorganization, is sometimes used to divide an existing corporation on a tax-deferred basis into more than one corporation for corporate business purposes. In order for a divisive D reorganization to qualify for tax-deferred treatment at the corporate level under section 361, however, there must be a qualifying distribution of stock under section 355. In this case, petitioner divided its existing business into two parts by way of a spinoff. It transferred its clinical business to a newly formed subsidiary, Clinpath, in exchange for 100 percent of Clinpath’s stock. Petitioner then immediately distributed the Clinpath stock to its shareholders in a transaction petitioner claims met the requirements of section 355. If a spinoff does not qualify under section 355, it could result in a taxable dividend to the distributing corporation’s shareholders under section 301 to the extent of corporate earnings and profits and in tax to the distributing corporationPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011