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75(d)(2)(ii), Income Tax Regs., a group continues if its common
parent transfers substantially all its assets to a subsidiary
after which the common parent goes out of existence and there
remain one or more chains of includable corporations with a
common parent that was a member of the group prior to the date
the former common parent ceased to exist.
The reverse acquisition rules of section 1.1502-75(d)(3),
Income Tax Regs., provide that an affiliated group will not
terminate where the stock or assets of the common parent are
acquired by another corporation in exchange for the stock of that
other corporation, provided the shareholders of the acquired
common parent, after the acquisition, own more than 50 percent of
the value of the acquiring corporation’s stock. Sec. 1.1502-
75(d)(3)(i), Income Tax Regs. If the acquiring corporation,
before the acquisition, is a common parent of an affiliated
group, that group is deemed to terminate even though the
acquiring corporation/common parent continues to exist for all
purposes except those of the consolidated return provisions.
Section 1.1502-75(d)(3)(i), Income Tax Regs., further provides
that, after the acquisition, the acquiring corporation is to be
treated as the common parent of the group that is deemed to
survive the reverse acquisition. S. Pac. Co. v. Commissioner,
supra at 403.
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