Does section 355 apply to S corporations?

Under section 1363(), an S corporation does not recognize gain on the distribution of appreciated property that is permitted by section 354, 355, or 356 to be received without tie recognition of gain. This provision can only apply to an S corporation that is a transferor in a corporate reorganization.

What qualifies as tax free reorganization?

To qualify as a tax-free reorganization, stock of the buyer (or buyer’s affiliate) generally must be used as a significant portion of the consideration (varying from about 40% to 100% of the consideration, depending on the type of tax-free reorganization) and, in certain tax-free reorganizations, the stock must be …

Does section 291 apply to S corporations?

section 291 shall apply if the S corporation (or any predecessor) was a C corporation for any of the 3 immediately preceding taxable years.

What is a Type B acquisition?

A Type “B” acquisition has the following characteristics: Cash cannot exceed 20% of the total consideration. At least 80% of the acquiree’s stock must be acquired with the acquirer’s voting stock. The acquirer must buy at least 80% of the acquiree’s outstanding stock.

What is a Type C reorganization?

A C-reorganization, otherwise known as a “practical merger,” is where a target. corporation (“Target”) transfers “substantially all” of its properties to an acquiring. corporation (“Acquiror”) solely in exchange for all or a part of Acquiror’s “voting.

Can an S corporation spin-off?

This rule therefore acknowledges that an S corporation can generally participate in a tax-free reorganization under Section 368, acquire the assets or stock of another C or S corporation, including a consolidated group of corporations, engage in a tax-free split-up, split-off or spin-off under Section 355, or engage in …

Can two S corporations merge?

Generally, a corporation may merge into a “disregarded entity” (single-member limited liability company, or a qualified subsidiary of a REITs or S corporation) under specified circumstances and still qualify as a tax-free “A” or “C” reorganization.

What is a reorganization tax?

The main use and advantage of a tax-free reorganization is to acquire or dispose of the assets of a business without generating the income tax consequences that would result in a straight sale or purchase of those assets.

What is Section 291 interest disallowance?

Section 291(a)(3) disallows 20 percent of the related interest expense for qualified tax-exempt, bank qualified obligations. In other words, the Code allows banks to deduct 80 percent of the carrying cost of a qualified tax- exempt obligation. Continued on next page. Bank Qualified Bonds – Section 265. 13-11.

What does IRS Code 291 mean?

I.R.C. § 291(a)(2) Reduction In Percentage Depletion — In the case of iron ore and coal (including lignite), the amount allowable as a deduction under section 613 with respect to any property (as defined in section 614) shall be reduced by 20 percent of the amount of the excess (if any) of—

What is an F reorganization?

The I.R.C. defines a F Reorganization as “a mere change in identity, form, or place of organization of one corporation, however effected.”[1] This mere change can be accomplished in many ways and for different reasons.

What happens to an S corporation in a type B reorganization?

If the S corporation is the acquired corporation in a type B stock-for-stock reorganization, it can lose its S status because it has a corporate shareholder or goes out of existence in a subsequent liquidation.

What are the different types of Corporation reorganization?

The IRS Revenue Code (Section 368) identifies seven different types of corporation reorganization. A statutory merger or acquisition is based on one corporation acquiring another’s assets. A Type B reorganization involves one corporation acquiring another’s stock, which then becomes a subsidiary of the acquiring company.

What is a transferor Corporation in a reorganization?

Transferor corporation is the only acquired corporation: The resulting corporation may not hold property acquired from a corporation other than the transferor corporation, such that, as a result of the reorganization, it would succeed to and take into account the other corporation’s tax attributes under Sec. 381.

What is an S corporation and how does it work?

Congress created S corporation status in 1958. While S corporation status provides tax benefits such as corporate income and gains being taxed only once, at the individual level, it is subject to several limitations. Perhaps the most important is a limit on the number of shareholders; however, that restriction has been relaxed over time.