Sec. 368. Definitions relating to corporate reorganizations
 
(a) Reorganization
 (1) In general
 For purposes of parts I and II and this part, the term
 ''reorganization'' means -
 (A) a statutory merger or consolidation;
 

 

Sections 356(a)(1) Ex. 5, (2) Ex. 3, 368(a)(1)(A) Ex. 1, (b)(2) Ex. 1

 

 

 
 

Assumptions:  The transaction is not a disguised 301 distribution.

 

Treatment:  The transaction is an A reorganization because it is a statutory merger.  368(a)(1)(A).  Both X, the corporation whose assets were acquired, and Y, the acquirer of those assets, are parties to a reorganization.  368(b)(2).  A has a realized gain of 1 AR 66 - AB 65).  A's recognized gain is 1, the lesser of the realized gain of or the boot received of 6.  356(a)(1).  The character of that gain is determined by 356(a)(2). Because A continues to be a 60% (majority) shareholder receiving boot proportional to that ownership, the likely result is that the exchange has the effect of a dividend distribution to A (but not B).  The dividend treatment is limited, however, to A's gain recognized under 356(a)(1) as well as A's ratable share of accumulated E&P.  Apparently, accumulated E&P is he combined E&P of X and Y.  A's ratable portion would be 2.40 = 60% x (2 + 2).  But, A's recognized gain of 1 is less.  So, A would have dividend income of 1.

 
 

Sections 368(a)(1)(A) Ex. 2, (b)(1) Ex. 1

 
 
 
 

Treatment:  The merger of 2 (or more) corporations into a new corporation is a consolidation and, therefore, an A reorganization.  368(a)(1)(A).  Newco, a corporation resulting from the reorganization, is a "party to a reorganization".  368(b)(1).

 

 

Sections 368(a)(1)(A) Ex. 3, (2)(D)(i)

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The merger is treated as an A reorganization (368(a)(1)(A)) even though it is not a Forward Triangular Merger, having not satisfied 368(a)(2)(D).  Aside from the issue of the consideration received by A, the transaction would satisfy 368(a)(1)(A).  And, aside from this same issue, the transaction would satisfy the 368(a)(2)(D) requirements.  But, the transaction runs afoul of 368(a)(2)(D))(i), which prohibits the use of any stock of the acquirer, S.  The transaction nonetheless satisfies 368(a)(1)(A) outright because the acquirer, S, uses, in part, its own stock, and the amount of S stock used is sufficient by itself to satisfy the continuity requirement.

 

 
 
 
 (B) the acquisition by one corporation, in exchange solely
 for all or a part of its voting stock (or in exchange solely
 for all or a part of the voting stock of a corporation which is
 in control of the acquiring corporation), of stock of another
 corporation if, immediately after the acquisition, the
 acquiring corporation has control of such other corporation
 (whether or not such acquiring corporation had control
 immediately before the acquisition);
 
 

Sections 368(a)(1)(B) Ex. 1, (b)(2) Ex. 2

 
 
 
 

Assumptions:  The exchange between A and P is unrelated to the exchange between B and P.

 

Treatment:  B's exchange of 100% of the Y stock solely for P voting stock qualifies as a B reorganization - P controls Y afterwards.  368(a)(1)(B).  Because P acquired the stock of Y, both P and Y are parties to a reorganization.  368(b)(2).  While P also controls X after its exchange with A, that exchange is not a B reorganization (or any other type of reorganization) because the exchange was not solely for P voting stock (A also received cash).

 

 

Section 368(a)(1)(B) Ex. 3

 

 

Treatment:  The transaction qualifies as a B reorganization.  368(a)(1)(B).  It is an exchange of X stock solely for P voting stock where P controls X afterwards.  It does not matter that P controlled X before the exchange.

 

 

 

 
 
 (C) the acquisition by one corporation, in exchange solely
 for all or a part of its voting stock (or in exchange solely
 for all or a part of the voting stock of a corporation which is
 in control of the acquiring corporation), of substantially all
 of the properties of another corporation, but in determining
 whether the exchange is solely for stock the assumption by the
 acquiring corporation of a liability of the other shall be
 disregarded;
 

Sections 368(a)(1)(C) Ex. 1, 354(a)(1) Ex. 1, 358(a)(1) Ex. 7, 361(a) Ex.1, (c)(1) Ex. 2, (c)(4) Ex. 2, 362(b) Ex. 5,

381(a) Ex. 1, (c)(1) Ex. 1, (c)(2) Ex. 3, 1032(a) Ex. 1, 1223(1) Ex. 1, (2) Ex. 1

 

 

Treatment:  The transaction is a C reorganization. 368(a)(1)(C).  T does not recognize gain or loss on the exchange of its assets for P stock.  361(a).  T also does not recognize gain or loss on the distribution of the P voting stock under 361(c)(1) and 336 does not apply to T.  361(c)(4).  P does not recognize gain on the use of its P stock.  1032(a).  A recognizes none of the realized gain of 200 (300 - 100), because A has received solely stock or securities of another party to the reorganization in exchange for stock or securities of a party to the reorganization.  354(a)(1).  A's basis in the stock received will equal 100, A's basis in the T stock surrendered.  358(a)(1).  A's holding period in the P stock will include A's holding period in the T stock.  1223(1).  P's bases in the T assets received will equal T's 200 bases in those assets .  362(b).  P's holding period in those assets will include T's holding period.  1223(2).  P will succeed to certain T attributes, including T's NOL carryover (subject to possible limitations) and T's E&P.  381(a), (c)(1) & (2).

 

 

Sections 361(b)(1)(A), (c)(1) Ex. 3, 368(a)(1)(C) Ex. 2, (a)(2)(B) Ex. 1, (G)(i) Ex. 1

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While it does not satisfy the strict language of 368(a)(1)(C) itself, it qualifies by virtue of 368(a)(2)(B) - the P voting stock used has FMV of at least 80% of the FMV of T's assets (60 >= (80% x 70)).  Furthermore, T transfers all the stock, securities and other properties it receives (here, P stock and cash) and it has none of its own assets to distribute.  Thus, the requirements of 368(a)(2)(G) are satisfied.  Because T has distributed all of the P cash received, T does not recognize gain or loss on the exchange, 361(b)(1)(A), nor on the distribution, 361(c)(1).  Note that due to the distribution requirement of 368(a)(2)(C), 361(b)(1)(A) should always be satisfied in a C reorganization.

 

 

Sections 361(b)(3) Ex. 1, (c)(1) Ex. 4, 368(a)(1)(C) Ex. 3, (a)(2)(G)(i) Ex. 3, (b)(2) Ex. 3

 
 
 

Assumptions:  B, not a shareholder of T, is a creditor of T, owed 50.  T pays B in satisfaction of that debt pursuant to the plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  As a necessary component of a C reorganization, T must distribute the stock, securities and other properties it receives, as well as any other assets it has (here, there are no other assets, all T assets having been transferred to P).  While T did not distribute the 50 cash received from P to A, it did distribute to B, a creditor, pursuant to the reorganization and this will qualify for purposes of satisfying 368(a)(2)(G).

 

T will not recognize gain on its exchange with P.  While T would generally recognize realized gain to the extent it does not distribute boot received, 361(b)(1), a transfer of boot to creditors pursuant to the reorganization will suffice for this purpose.  368(b)(3).  T does not have a realized gain on the transfer of cash to B in satisfaction of the debt. 

 

Both T, the corporation whose assets are being acquired, and P, the acquirer of those assets, are considered parties to a reorganization.  368(b)(2).

 
 

Sections 368(a)(1)(C) Ex.4, (b) Ex. 2

 
 
 
 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While T does not receive solely voting stock of S, it does receive solely voting stock of P, a corporation in control of S, hence satisfying the requirements of 368(a)(1)(C).  More particularly, the transaction is a triangular C reorganization.  P, S and T are all "parties to a reorganization".  368(b).  P is a party to a reorganization because it is a corporation in control of the acquirer, S, and P stock is used in the transaction.

 

 

Sections 368(a)(1)(C) Ex. 5, (2)(B) Ex. 2

 

 

 

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While T transferred its liabilities as well as its assets, this transfer of liabilities is specifically allowed by 368(a)(1)(C) (without resort to the boot relaxation rule of 368(a)(2)(B)).

 

 

Section 368(a)(1)(C) Ex. 6

 

 

 
 
 

Treatment:  The transaction is taxable.  The transaction would have qualified as a C reorganization but for the requirement that T transfer substatially all of its assets.  368(a)(1)(C).  While the transfer of none of the cash by itself would probably not be dispositive, the transfer of only half of the operating assets is fatal.

 

 

Sections 368(a)(1)(C) Ex. 7, (a)(2)(B) Ex. 3

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is not a reorganization.  The most likely possibility is 368(a)(1)(C), but it fails those requirements.  368(a)(1)(C) itself generally requires an exchange of substantially all assets solely for voting stock.  But, for this purpose, a transfer (or assumption) of target liabilities is ignored.  Here, though, there was both a transfer of liabilities by T and a receipt of actual boot (cash) by T.  Having not satisfied 368(a)(1)(C) directly, the parties must resort to the boot relaxation rule, 368(a)(2)(B).  This rule requires the use of P voting stock at least equal to 64 = 80% x 80, which is more than the 60 actually transferred.  For this purpose, the transfer of liabilities is treated as though a receipt of cash and, therefore, the boot relaxation rule is not satisfied and the transaction is not a C reorganization.

 

 
 
 (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;
 

Sections 355(a), (c)(1) Ex. 2, 368(a)(1)(D) Ex. 1, 312(h), 358(c) Ex. 2, 361(c) Ex. 1

 
 

Assumptions: X has conducted both Widget and Cog businesses directly for 25 years.  The transaction was not used principally as a device for the distribution of earnings and profits.

 

Treatment:  The transaction qualifies as a divisive D reorganization pursuant to 355 and 368(a)(1)(D).  X recognizes none of its realized gain of 50 in its exchange with Newco.  361(b).  Newco recognizes no gain or loss on the distribution of Newco stock to A.  361(c).  A recognizes no gain or loss on the receipt of the Newco stock.  355(a).  A's basis in X and Newco will be 60 each based on their respective FMVs.  358(a)(1), and (c) and Reg. 1.358-2(a)(1) and (2).  E&P is likewise allocated 60/60 based on relative FMVs312(h).  The entire NOL stays with X.  Newco will AB of 50 in the Cog assets.  362(b).  N.b., 355(c) does not apply because the transaction is a reorganization.

 
 

Sections 355(a)(2), 368(a)(1)(D) Ex. 2

 
 

Assumptions:  P and S1 have conducted their businesses for more than 5 years.  P distributed S1 pro-rata.  P exchanged Newco with C for 10 P shares.

 

Treatment:  P's distributions of S1 and Newco can both qualify for 355 treatment.  P's distribution of S1 qualifies even though the shareholders did not surrender stock in exchange.  355(a)(2)(B).  355 treatment applies whether the stock is received pro-rata (as is the case with P C's exchange of Newco stock for P stock).  355(a)(2)(A).  355 treatment applies whether the transaction is a D reorganization (as is the case with Newco) or not (as is the case with S1).  355(a)(2)(C).  P's exchange of Widget assets for Newco stock is a D reorganization because P has transferred part of its assets and immediately afterwards one of its shareholders, C, owns a controlling interest in Newco, and the transaction qualifies under 355.

 

 

Sections 354(b) Ex. 1, 368(a)(1)(D) Ex. 3

 
 
 
 

Assumptions:  The transaction is not a disguised dividend.

 

Treatment:  The transaction is a non-divisive D reorganization, 368(a)(1)(D), by virtue of qualifying under 356(a).  The transaction would have qualified under 354(a) but for the receipt of cash, and so it qualifies under 356.   In order to qualify under 354(a), the transaction must satisfy 354(b).  X acquired substantially all of P's assets, having acquired all of P's operating assets, thus satisfying 354(b)(1)(A).  By liquidating, P satisfies 354(b)(1)(B).  The main point of 354(b) is to distinguish non-divisive D and G reorganizations from divisive D and G reorganizations which must qualify under 355 (or 356 by way of 355).  See, 355(b)(2).

 

 

Section 368(a)(1)(D) Ex. 4

 

 

 

Assumptions:  P has conducted both the Widget and Cog businesses for more than 5 years.  The transaction is for valid business reasons and is not a device for the distribution of E&P.

 

Treatment: The transaction is a divisive D reorganization with boot.  368(a)(1)(D).  P has transferred part of its assets to Newco and immediately afterwards B, who is a person who was a shareholder immediately before the transfer, controls the transferee, Newco.  Furthermore, stock of Newco has been distributed to B pursuant to a transaction that qualifies under 356 - the transaction would have qualified under 355 but for the distribution of boot to B, and so 356 applies instead.  356(a)(1).

 

 

 

 
 
 (E) a recapitalization;
 
 

Section 368(a)(1)(E) Ex. 1

 
 
 
 

Treatment:  Exchange of one type of stock for another in the same corporation is a recapitalization and, therefore, a reorganization.  368(a)(1)(E).

 

 
 

Section 368(a)(1)(E) Ex. 2

 
 
 
 

Treatment:  Exchange of debt for stock in the same corporation is a recapitalization and, therefore, a reorganization.  368(a)(1)(E).

 
 

Section 368(a)(1)(E) Ex. 3

 
 
 
 

Treatment:  The exchange of securities for securities in the same corporation is technically a recapitalization and therefore, a reorganization.  368(a)(1)(E).  Caution should be exercised, however, because many of the most important consequences are found outside Subchapter C.

 
 
 

Section 368(a)(1)(E) Ex. 4

 
 
 
 

Treatment:  The exchange of stock for securities in the same corporation is technically a recapitalization and, therefore, a reorganization.  368(a)(1)(E).  Caution should be exercised, however, because many of the most important consequences are found outside Subchapter C.

 
 

Sections 368(a)(1)(F), (b)(1) Ex. 2

 
 
 
 

Assumptions:  X Savings is a mutual savings bank organized under the laws of New Jersey.  X Financial is a stock corporation organized under the laws of Delaware.

 

Treatment:  The transaction is a mere change in identity (changing the name of the company), form (changing from a mutual savings bank to a stock bank) and place (changing from organized in New Jersey to Delaware) of organization.  Hence, it is an F reorganization.  368(a)(1)(F).   This is true even if, as here, it takes the form of an A reorganization, or some other type of reorganization.  The purpose is controlling in finding an F reorganization.  While the present facts indicate a change in identity, form and place of organization, a mer change in any one (or two) of those characteristics would likewise be an F reorganization.  X Financial, a corporation resulting from the reorganzation, is a "party to a reorganization".  368(b)(1).

 

 
 
 (F) a mere change in identity, form, or place of organization
 of one corporation, however effected; or
 
 
 

Sections 368(a)(1)(F), (b)(1) Ex. 2

 
 
 
 

Assumptions:  X Savings is a mutual savings bank organized under the laws of New Jersey.  X Financial is a stock corporation organized under the laws of Delaware.

 

Treatment:  The transaction is a mere change in identity (changing the name of the company), form (changing from a mutual savings bank to a stock bank) and place (changing from organized in New Jersey to Delaware) of organization.  Hence, it is an F reorganization.  368(a)(1)(F).   This is true even if, as here, it takes the form of an A reorganization, or some other type of reorganization.  The purpose is controlling in finding an F reorganization.  While the present facts indicate a change in identity, form and place of organization, a mere change in any one (or two) of those characteristics would likewise be an F reorganization.  X Financial, a corporation resulting from the reorganization, is a "party to a reorganization".  368(b)(1).

 
 
 (G) a transfer by a corporation of all or part of its assets
 to another corporation in a title 11 or similar case; 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.
 (2) Special rules relating to paragraph (1)
 (A) Reorganizations described in both paragraph (1)(C) and
 paragraph (1)(D)
 If a transaction is described in both paragraph (1)(C) and
 paragraph (1)(D), then, for purposes of this subchapter (other
 than for purposes of subparagraph (C)), such transaction shall
 be treated as described only in paragraph (1)(D).
 
 
 

Sections 368(a)(2)(A), (C) Ex. 1

 
 
 

Assumptions:  P transfers all of its assets to X.

 

Treatment:  P's transaction with X could qualify as both a C and a D reorganization.  In such cases, D reorganization status generally prevails.  368(a)(2)(A), but not for purposes of applying 368(a)(2)(C).  Hence, X's drop-down of the assets to Newco will not prevent the overall transaction from qualifying as a reorganization. 

 
 
 (B) Additional consideration in certain paragraph (1)(C) cases
 If -
 (i) one corporation acquires substantially all of the
 properties of another corporation,
 (ii) the acquisition would qualify under paragraph (1)(C)
 but for the fact that the acquiring corporation exchanges
 money or other property in addition to voting stock, and
 (iii) the acquiring corporation acquires, solely for voting
 stock described in paragraph (1)(C), property of the other
 corporation having a fair market value which is at least 80
 percent of the fair market value of all of the property of
 the other corporation,
 then such acquisition shall (subject to subparagraph (A) of
 this paragraph) be treated as qualifying under paragraph
 (1)(C). Solely for the purpose of determining whether clause
 (iii) of the preceding sentence applies, the amount of any
 liability assumed by the acquiring corporation shall be treated
 as money paid for the property.
 
 
 

Sections 361(b)(1)(A), (c)(1) Ex. 3, 368(a)(1)(C) Ex. 2, (a)(2)(B) Ex. 1, (G)(i) Ex. 1

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While it does not satisfy the strict language of 368(a)(1)(C) itself, it qualifies by virtue of 368(a)(2)(B) - the P voting stock used has FMV of at least 80% of the FMV of T's assets (60 >= (80% x 70)).  Furthermore, T transfers all the stock, securities and other properties it receives (here, P stock and cash) and it has none of its own assets to distribute.  Thus, the requirements of 368(a)(2)(G) are satisfied.  Because T has distributed all of the P cash received, T does not recognize gain or loss on the exchange, 361(b)(1)(A), nor on the distribution, 361(c)(1).  Note that due to the distribution requirement of 368(a)(2)(C), 361(b)(1)(A) should always be satisfied in a C reorganization.

 

 

 

Sections 368(a)(1)(C) Ex. 5, (2)(B) Ex. 2

 

 

 

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While T transferred its liabilities as well as its assets, this transfer of liabilities is specifically allowed by 368(a)(1)(C) (without resort to the boot relaxation rule of 368(a)(2)(B)).

 

 

 

Sections 368(a)(1)(C) Ex. 7, (a)(2)(B) Ex. 3

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is not a reorganization.  The most likely possibility is 368(a)(1)(C), but it fails those requirements.  368(a)(1)(C) itself generally requires an exchange of substantially all assets solely for voting stock.  But, for this purpose, a transfer (or assumption) of target liabilities is ignored.  Here, though, there was both a transfer of liabilities by T and a receipt of actual boot (cash) by T.  Having not satisfied 368(a)(1)(C) directly, the parties must resort to the boot relaxation rule, 368(a)(2)(B).  This rule requires the use of P voting stock at least equal to 64 = 80% x 80, which is more than the 60 actually transferred.  For this purpose, the transfer of liabilities is treated as though a receipt of cash and, therefore, the boot relaxation rule is not satisfied and the transaction is not a C reorganization.

 

 

 
 
 (C) Transfers of assets or stock to subsidiaries in certain
 paragraph (1)(A), (1)(B), (1)(C), and (1)(G) cases
 A transaction otherwise qualifying under paragraph (1)(A),
 (1)(B), or (1)(C) shall not be disqualified by reason of the
 fact that part or all of the assets or stock which were
 acquired in the transaction are transferred to a corporation
 controlled by the corporation acquiring such assets or stock.
 A similar rule shall apply to a transaction otherwise
 qualifying under paragraph (1)(G) where the requirements of
 subparagraphs (A) and (B) of section 354(b)(1) are met with
 respect to the acquisition of the assets.
 

Sections 368(a)(2)(A), (C) Ex. 1

 
 
 

Assumptions:  P transfers all of its assets to X.

 

Treatment:  P's transaction with X could qualify as both a C and a D reorganization.  In such cases, D reorganization status generally prevails.  368(a)(2)(A), but not for purposes of applying 368(a)(2)(C).  Hence, X's drop-down of the assets to Newco will not prevent the overall transaction from qualifying as a reorganization. 

 

 

Sections 368(a)(2)(C) Ex. 2, (b) Ex. 3

 

 

 

 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is an A reorganization.  368(a)(1)(A).  The transaction is not disqualified by P's subsequent drop-down of the T assets to Sub, a company controlled by P.  368(a)(2)(C).  P, S and T are all considered "parties to a reorganization".  368(b).

 

 

 

Sections 368(a)(2)(C) Ex. 3, (b) Ex. 4

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment: The transaction is a B reorganization.  368(a)(1)(B).  The transaction is not disqualified by P's subsequent drop-down of the T stock to Newco, a corporation controlled by P.  368(a)(2)(C).  P, T and Newco are all considered "parties to a reorganization".  368(b).

 

 
 
 (D) Use of stock of controlling corporation in paragraph (1)(A)
 and (1)(G) cases
 The acquisition by one corporation, in exchange for stock of
 a corporation (referred to in this subparagraph as
 ''controlling corporation'') which is in control of the
 acquiring corporation, of substantially all of the properties
 of another corporation shall not disqualify a transaction under
 paragraph (1)(A) or (1)(G) if -
 (i) no stock of the acquiring corporation is used in the
 transaction, and
 
 
 

Sections 368(a)(1)(A) Ex. 3, (2)(D)(i)

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The merger is treated as an A reorganization (368(a)(1)(A)) even though it is not a Forward Triangular Merger, having not satisfied 368(a)(2)(D).  Aside from the issue of the consideration received by A, the transaction would satisfy 368(a)(1)(A).  And, aside from this same issue, the transaction would satisfy the 368(a)(2)(D) requirements.  But, the transaction runs afoul of 368(a)(2)(D))(i), which prohibits the use of any stock of the acquirer, S.  The transaction nonetheless satisfies 368(a)(1)(A) outright because the acquirer, S, uses, in part, its own stock, and the amount of S stock used is sufficient by itself to satisfy the continuity requirement.

 
 
 (ii) in the case of a transaction under paragraph (1)(A),
 such transaction would have qualified under paragraph (1)(A)
 had the merger been into the controlling corporation.
 
 

 

Sections 368(a)(2)(D) Ex. 1, (b) Ex. 5

 

 

 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment: The transaction is an A reorganization.  368(a)(1)(A).  The transaction would have qualified as an A reorganization outright if T had merged into P.  Here, it is a Forward Triangular Merger, having satisfied the requirements of 368(a)(1)(D).  P, S and T are all "parties to a reorganization".  368(b).  P is a party to a reorganization because it is the controlling corporation.

 
 
 (E) Statutory merger using voting stock of corporation
 controlling merged corporation
 A transaction otherwise qualifying under paragraph (1)(A)
 shall not be disqualified by reason of the fact that stock of a
 corporation (referred to in this subparagraph as the
 ''controlling corporation'') which before the merger was in
 control of the merged corporation is used in the transaction,
 if -
 (i) after the transaction, the corporation surviving the
 merger holds substantially all of its properties and of the
 properties of the merged corporation (other than stock of the
 controlling corporation distributed in the transaction); and
 (ii) in the transaction, former shareholders of the
 surviving corporation exchanged, for an amount of voting
 stock of the controlling corporation, an amount of stock in
 the surviving corporation which constitutes control of such
 corporation.
 
 

Sections 368(a)(2)(E), (b) Ex.6

 
 
 
 

Assumptions: The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is an A reorganization by virtue of being a Reverse Triangular Merger, having satisfied the requirements of 368(a)(2)(E).  The transaction would have qualified as an A reorganization had T merged directly into P.  All of the assets (except stock of the controlling corporation, P) are held by T afterwards, as are all of the T assets.  Also, A and B, former shareholders of the surviving corporation, T, have transferred at 80% of the outstanding stock of T solely for P stock.  They are considered to have transferred 91% of their T stock for P stock:  200 FMV P stock received/220 total consideration received for 100% of T stock surrendered.  P, S and T are all "parties to a reorganization".  368(b).  P is a party to a reorganization because it is the controlling corporation. 

 

 
 
 (F) Certain transactions involving 2 or more investment
 companies
 (i) If immediately before a transaction described in
 paragraph (1) (other than subparagraph (E) thereof), 2 or
 more parties to the transaction were investment companies,
 then the transaction shall not be considered to be a
 reorganization with respect to any such investment company
 (and its shareholders and security holders) unless it was a
 regulated investment company, a real estate investment trust,
 or a corporation which meets the requirements of clause (ii).
 (ii) A corporation meets the requirements of this clause if
 not more than 25 percent of the value of its total assets is
 invested in the stock and securities of any one issuer, and
 not more than 50 percent of the value of its total assets is
 invested in the stock and securities of 5 or fewer issuers.
 For purposes of this clause, all members of a controlled
 group of corporations (within the meaning of section 1563(a))
 shall be treated as one issuer. For purposes of this clause,
 a person holding stock in a regulated investment company, a
 real estate investment trust, or an investment company which
 meets the requirements of this clause shall, except as
 provided in regulations, be treated as holding its
 proportionate share of the assets held by such company or
 trust.
 (iii) For purposes of this subparagraph the term
 ''investment company'' means a regulated investment company,
 a real estate investment trust, or a corporation 50 percent
 or more of the value of whose total assets are stock and
 securities and 80 percent or more of the value of whose total
 assets are assets held for investment. In making the
 50-percent and 80-percent determinations under the preceding
 sentence, stock and securities in any subsidiary corporation
 shall be disregarded and the parent corporation shall be
 deemed to own its ratable share of the subsidiary's assets,
 and a corporation shall be considered a subsidiary if the
 parent owns 50 percent or more of the combined voting power
 of all classes of stock entitled to vote, or 50 percent or
 more of the total value of shares of all classes of stock
 outstanding.
 (iv) For purposes of this subparagraph, in determining
 total assets there shall be excluded cash and cash items
 (including receivables). Government securities, and, under
 regulations prescribed by the Secretary, assets acquired
 (through incurring indebtedness or otherwise) for purposes of
 meeting the requirements of clause (ii) or ceasing to be an
 investment company.
 (v) This subparagraph shall not apply if the stock of each
 investment company is owned substantially by the same persons
 in the same proportions.
 (vi) If an investment company which does not meet the
 requirements of clause (ii) acquires assets of another
 corporation, clause (i) shall be applied to such investment
 company and its shareholders and security holders as though
 its assets had been acquired by such other corporation. If
 such investment company acquires stock of another corporation
 in a reorganization described in section 368(a)(1)(B), clause
 (i) shall be applied to the shareholders of such investment
 company as though they had exchanged with such other
 corporation all of their stock in such company for stock
 having a fair market value equal to the fair market value of
 their stock of such investment company immediately after the
 exchange. For purposes of section 1001, the deemed
 acquisition or exchange referred to in the two preceding
 sentences shall be treated as a sale or exchange of property
 by the corporation and by the shareholders and security
 holders to which clause (i) is applied.
 (vii) For purposes of clauses (ii) and (iii), the term
 ''securities'' includes obligations of State and local
 governments, commodity futures contracts, shares of regulated
 investment companies and real estate investment trusts, and
 other investments constituting a security within the meaning
 of the Investment Company Act of 1940 (15 U.S.C. 80a-2(36)).
 (FOOTNOTE 1)
 (FOOTNOTE 1) So in original. A reference to 15 U.S.C.
 80a-2(a)(36) was probably intended.
 ((viii) Repealed. Pub. L. 98-369, div. A, title I, Sec.
 174(b)(5)(D), July 18, 1984, 98 Stat. 707)
 (G) Distribution requirement for paragraph (1)(C)
 (i) In general
 A transaction shall fail to meet the requirements of
 paragraph (1)(C) unless the acquired corporation distributes
 the stock, securities, and other properties it receives, as
 well as its other properties, in pursuance of the plan of
 reorganization. For purposes of the preceding sentence, if
 the acquired corporation is liquidated pursuant to the plan
 of reorganization, any distribution to its creditors in
 connection with such liquidation shall be treated as pursuant
 to the plan of reorganization.
 
 
 

Sections 361(b)(1)(A), (c)(1) Ex. 3, 368(a)(1)(C) Ex. 2, (a)(2)(B) Ex. 1, (G)(i) Ex. 1

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While it does not satisfy the strict language of 368(a)(1)(C) itself, it qualifies by virtue of 368(a)(2)(B) - the P voting stock used has FMV of at least 80% of the FMV of T's assets (60 >= (80% x 70)).  Furthermore, T transfers all the stock, securities and other properties it receives (here, P stock and cash) and it has none of its own assets to distribute.  Thus, the requirements of 368(a)(2)(G) are satisfied.  Because T has distributed all of the P cash received, T does not recognize gain or loss on the exchange, 361(b)(1)(A), nor on the distribution, 361(c)(1).  Note that due to the distribution requirement of 368(a)(2)(C), 361(b)(1)(A) should always be satisfied in a C reorganization.

 
 
 

Section 368(a)(2)(G)(i) Ex. 2

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction does not qualify as a reorganization.  While T has transferred substantially all of its assets in exchange for P voting stock and a limited amount of boot (the boot relaxation rule of 368(a)(2)(B) would have been satisfied) it is not a C reorganization.  The requirements of 368(a)(2)(G)(i) are not satisfied in that T did not distribute its assets (as well as all of the assets it receives).

 

 
 
 

Sections 361(b)(3) Ex. 1, (c)(1) Ex. 4, 368(a)(1)(C) Ex. 3, (a)(2)(G)(i) Ex. 3, (b)(2) Ex. 3

 
 
 

Assumptions:  B, not a shareholder of T, is a creditor of T, owed 50.  T pays B in satisfaction of that debt pursuant to the plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  As a necessary component of a C reorganization, T must distribute the stock, securities and other properties it receives, as well as any other assets it has (here, there are no other assets, all T assets having been transferred to P).  While T did not distribute the 50 cash received from P to A, it did distribute to B, a creditor, pursuant to the reorganization and this will qualify for purposes of satisfying 368(a)(2)(G).

 

T will not recognize gain on its exchange with P.  While T would generally recognize realized gain to the extent it does not distribute boot received, 361(b)(1), a transfer of boot to creditors pursuant to the reorganization will suffice for this purpose.  368(b)(3).  T does not have a realized gain on the transfer of cash to B in satisfaction of the debt. 

 

Both T, the corporation whose assets are being acquired, and P, the acquirer of those assets, are considered parties to a reorganization.  368(b)(2).

 
 
 (ii) Exception
 The Secretary may waive the application of clause (i) to
 any transaction subject to any conditions the Secretary may
 prescribe.
 

Section 368(a)(2)(G)(ii)

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.  The T charter has a value (e.g., as an insurance company) apart from the actual assets of T as long as T maintains a minimum capital, and T retains assets (the cash of 20 and other liquid assets of 20) in order to satisfy those minimum capital requirements (e.g., as may br imposed by state insurance laws).  A will sell the T stock no later than 12 months following T's transfer of its operating assets to P.

 

Treatment:  The transaction is a C reorganization by virtue of satisfying 368(a)(1)(C), (2)(B) & (2)(G)(ii).  The transaction qualifies even though T did not actually distribute all of its assets because to do so would cause a loss of the value of the T charter and because T otherwise satisfies the requirements of Rev. Proc. 89-50.  Accordingly, when A does sell T, T will be deemed to distribute to A as part of the C reorganization the liquid assets of 20, the cash of 20 and the T charter, completing the C reorganization.  A is then deemed to have contributed those assets to New T.

 

 
 
 (H) Special rules for determining whether certain transactions
 are qualified under paragraph (1)(D)
 For purposes of determining whether a transaction qualifies
 under paragraph (1)(D) -
 (i) in the case of a transaction with respect to which the
 requirements of subparagraphs (A) and (B) of section
 354(b)(1) are met, the term ''control'' has the meaning given
 such term by section 304(c), and
 
 

Sections 368(a)(2)(H)(i), (c) Ex.1

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.  T pays off its liabilities with its available cash.

 

Treatment:  The transaction is a non-divisive D reorganization, having satisfied 354(b).  One of the requirements for a D reorganization is that immediately after the transaction the transferor (here T) or its shareholders (here A) control the transferee (here P).  Here, A owns 100 of the 150 P shares outstanding following the transaction.  Control is generally defined as ownership o stock possessing at least 80% of the total combined voting power of all outstanding classes and at least 80% of each other class of stock.  368(c). This definition is modified, however, in the case of non-divisive D reorganizations.  368(a)(2)(H)(i) such that the 304(c) definition of control is instead used.  304(c)(1) generally defines control as ownership of stock possessing at least 50% of the total combined voting power or 50% of the total value of all classes of stock.  And so here, while A does not satisfy the 368(c) definition of control, A does satisfy the 304(c) definition, thereby satisfying the control requirements of 368(a)(1)(D).

 

 
 
 (ii) in the case of a transaction with respect to which the
 requirements of section 355 (or so much of section 356 as
 relates to section 355) are met, the fact that the
 shareholders of the distributing corporation dispose of part
 or all of the distributed stock, or the fact that the
 corporation whose stock was distributed issues additional
 stock, shall not be taken into account.
 
 

Section 368(a)(2)(H)(ii) Ex. 1

 
 
 
 

Assumptions:  P has conducted its Cog and Widget businesses for over 5 years.

 

Treatment:  The transaction is a divisive D reorganization.  It is not a device to distribute E&P because there are none.  See Reg. 1.355-2(d)(5)(ii).  One of the requirements for a D reorganization is that the transferor (here, P) or its shareholders (here, A and B) control the transferee (here, Newco) after the transaction.  For this purpose, the fact that shareholders dispose of part or all of the distributed stock (as B did here) is ignored.  368(a)(2)(H)(ii).

 

 

Section 368(a)(2)(H)(ii) Ex. 2

 
 
 
 

Assumptions:  P has conducted its Cog and Widget businesses for over 5 years.  Newco was formed in order to raise capital to expand the Widget business.

 

Treatment:  The transaction is a divisive D reorganization.  It is not a device to distribute E&P because there are none.  One of the requirements for a D reorganization is that the transferor (here, P) or its shareholders (here, A and B) control the transferee (here, Newco) after the transaction.  For this purpose, the fact that Newco issues additional stock (here, to a third party) is ignored.  Hence, the control requirement is satisfied.

 

 
 
 

Sections 368(a)(1)(B) Ex. 1, (b)(2) Ex. 2

 
 
 
 

Assumptions:  The exchange between A and P is unrelated to the exchange between B and P.

 

Treatment:  B's exchange of 100% of the Y stock solely for P voting stock qualifies as a B reorganization - P controls Y afterwards.  368(a)(1)(B).  Because P acquired the stock of Y, both P and Y are parties to a reorganization.  368(b)(2).  While P also controls X after its exchange with A, that exchange is not a B reorganization (or any other type of reorganization) because the exchange was not solely for P voting stock (A also received cash).

 

 

Sections 361(b)(3) Ex. 1, (c)(1) Ex. 4, 368(a)(1)(C) Ex. 3, (a)(2)(G)(i) Ex. 3, (b)(2) Ex. 3

 
 
 

Assumptions:  B, not a shareholder of T, is a creditor of T, owed 50.  T pays B in satisfaction of that debt pursuant to the plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  As a necessary component of a C reorganization, T must distribute the stock, securities and other properties it receives, as well as any other assets it has (here, there are no other assets, all T assets having been transferred to P).  While T did not distribute the 50 cash received from P to A, it did distribute to B, a creditor, pursuant to the reorganization and this will qualify for purposes of satisfying 368(a)(2)(G).

 

T will not recognize gain on its exchange with P.  While T would generally recognize realized gain to the extent it does not distribute boot received, 361(b)(1), a transfer of boot to creditors pursuant to the reorganization will suffice for this purpose.  368(b)(3).  T does not have a realized gain on the transfer of cash to B in satisfaction of the debt. 

 

Both T, the corporation whose assets are being acquired, and P, the acquirer of those assets, are considered parties to a reorganization.  368(b)(2).

 
 
 
 (3) Additional rules relating to title 11 and similar cases
 (A) Title 11 or similar case defined
 For purposes of this part, the term ''title 11 or similar
 case'' means -
 (i) a case under title 11 of the United States Code, or
 (ii) a receivership, foreclosure, or similar proceeding in
 a Federal or State court.
 (B) Transfer of assets in a title 11 or similar case
 In applying paragraph (1)(G), a transfer of the assets of a
 corporation shall be treated as made in a title 11 or similar
 case if and only if -
 (i) any party to the reorganization is under the
 jurisdiction of the court in such case, and
 (ii) the transfer is pursuant to a plan of reorganization
 approved by the court.
 (C) Reorganizations qualifying under paragraph (1)(G) and
 another provision
 If a transaction would (but for this subparagraph) qualify
 both -
 (i) under subparagraph (G) of paragraph (1), and
 (ii) under any other subparagraph of paragraph (1) or under
 section 332 or 351,
 then, for purposes of this subchapter (other than section
 357(c)(1)), such transaction shall be treated as qualifying
 only under subparagraph (G) of paragraph (1).
 (D) Agency receivership proceedings which involve financial
 institutions
 For purposes of subparagraphs (A) and (B), in the case of a
 receivership, foreclosure, or similar proceeding before a
 Federal or State agency involving a financial institution
 referred to in section 581 or 591, the agency shall be treated
 as a court.
 (E) Application of paragraph (2)(E)(ii)
 In the case of a title 11 or similar case, the requirement of
 clause (ii) of paragraph (2)(E) shall be treated as met if -
 (i) no former shareholder of the surviving corporation
 received any consideration for his stock, and
 (ii) the former creditors of the surviving corporation
 exchanged, for an amount of voting stock of the controlling
 corporation, debt of the surviving corporation which had a
 fair market value equal to 80 percent or more of the total
 fair market value of the debt of the surviving corporation.
 (b) Party to a reorganization
 For purposes of this part, the term ''a party to a
 reorganization'' includes -
 (1) a corporation resulting from a reorganization, and
 
 
 

Sections 368(a)(1)(F), (b)(1) Ex. 2

 
 
 
 

Assumptions:  X Savings is a mutual savings bank organized under the laws of New Jersey.  X Financial is a stock corporation organized under the laws of Delaware.

 

Treatment:  The transaction is a mere change in identity (changing the name of the company), form (changing from a mutual savings bank to a stock bank) and place (changing from organized in New Jersey to Delaware) of organization.  Hence, it is an F reorganization.  368(a)(1)(F).   This is true even if, as here, it takes the form of an A reorganization, or some other type of reorganization.  The purpose is controlling in finding an F reorganization.  While the present facts indicate a change in identity, form and place of organization, a mere change in any one (or two) of those characteristics would likewise be an F reorganization.  X Financial, a corporation resulting from the reorganization, is a "party to a reorganization".  368(b)(1).

 
 
 (2) both corporations, in the case of a reorganization
 resulting from the acquisition by one corporation of stock or
 properties of another.
 In the case of a reorganization qualifying under paragraph (1)(B)
 or (1)(C) of subsection (a), if the stock exchanged for the stock
 or properties is stock of a corporation which is in control of the
 acquiring corporation, the term ''a party to a reorganization''
 includes the corporation so controlling the acquiring corporation.
 In the case of a reorganization qualifying under paragraph (1)(A),
 (1)(B), or (1)(C), or (1)(G) of subsection (a) by reason of
 paragraph (2)(C) of subsection (a), the term ''a party to a
 reorganization'' includes the corporation controlling the
 corporation to which the acquired assets or stock are transferred.
 In the case of a reorganization qualifying under paragraph (1)(A)
 or (1)(G) of subsection (a) by reason of paragraph (2)(D) of that
 subsection, the term ''a party to a reorganization'' includes the
 controlling corporation referred to in such paragraph (2)(D). In
 the case of a reorganization qualifying under subsection (a)(1)(A)
 by reason of subsection (a)(2)(E), the term ''party to a
 reorganization'' includes the controlling corporation referred to
 in subsection (a)(2)(E).
 

 

 

Sections 368(a)(1)(C) Ex.4, (b) Ex. 2

 
 
 
 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  While T does not receive solely voting stock of S, it does receive solely voting stock of P, a corporation in control of S, hence satisfying the requirements of 368(a)(1)(C).  More particularly, the transaction is a triangular C reorganization.  P, S and T are all "parties to a reorganization".  368(b).  P is a party to a reorganization because it is a corporation in control of the acquirer, S, and P stock is used in the transaction.

 

Sections 368(a)(2)(C) Ex. 2, (b) Ex. 3

 

 

 

 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is an A reorganization.  368(a)(1)(A).  The transaction is not disqualified by P's subsequent drop-down of the T assets to Sub, a company controlled by P.  368(a)(2)(C).  P, S and T are all considered "parties to a reorganization".  368(b).

 

 

Sections 368(a)(2)(C) Ex. 3, (b) Ex. 4

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment: The transaction is a B reorganization.  368(a)(1)(B).  The transaction is not disqualified by P's subsequent drop-down of the T stock to Newco, a corporation controlled by P.  368(a)(2)(C).  P, T and Newco are all considered "parties to a reorganization".  368(b).

 

 

Sections 368(a)(2)(D) Ex. 1, (b) Ex. 5

 

 

 

Assumptions:  The transaction is pursuant to a plan of reorganization.

 

Treatment: The transaction is an A reorganization.  368(a)(1)(A).  The transaction would have qualified as an A reorganization outright if T had merged into P.  Here, it is a Forward Triangular Merger, having satisfied the requirements of 368(a)(1)(D).  P, S and T are all "parties to a reorganization".  368(b).  P is a party to a reorganization because it is the controlling corporation.

 

 

Sections 368(a)(2)(E), (b) Ex.6

 
 
 
 

Assumptions: The transaction is pursuant to a plan of reorganization.

 

Treatment:  The transaction is an A reorganization by virtue of being a Reverse Triangular Merger, having satisfied the requirements of 368(a)(2)(E).  The transaction would have qualified as an A reorganization had T merged directly into P.  All of the assets (except stock of the controlling corporation, P) are held by T afterwards, as are all of the T assets.  Also, A and B, former shareholders of the surviving corporation, T, have transferred at 80% of the outstanding stock of T solely for P stock.  They are considered to have transferred 91% of their T stock for P stock:  200 FMV P stock received/220 total consideration received for 100% of T stock surrendered.  P, S and T are all "parties to a reorganization".  368(b).  P is a party to a reorganization because it is the controlling corporation. 

 

 

 

 

Sections 356(a)(1) Ex. 5, (2) Ex. 3, 368(a)(1)(A) Ex. 1, (b)(2) Ex. 1

 

 

 
 

Assumptions:  The transaction is not a disguised 301 distribution.

 

Treatment:  The transaction is an A reorganization because it is a statutory merger.  368(a)(1)(A).  Both X, the corporation whose assets were acquired, and Y, the acquirer of those assets, are parties to a reorganization.  368(b)(2).  A has a realized gain of 1 AR 66 - AB 65).  A's recognized gain is 1, the lesser of the realized gain of or the boot received of 6.  356(a)(1).  The character of that gain is determined by 356(a)(2). Because A continues to be a 60% (majority) shareholder receiving boot proportional to that ownership, the likely result is that the exchange has the effect of a dividend distribution to A (but not B).  The dividend treatment is limited, however, to A's gain recognized under 356(a)(1) as well as A's ratable share of accumulated E&P.  Apparently, accumulated E&P is he combined E&P of X and Y.  A's ratable portion would be 2.40 = 60% x (2 + 2).  But, A's recognized gain of 1 is less.  So, A would have dividend income of 1.

 
 
 

Sections 361(b)(3) Ex. 1, (c)(1) Ex. 4, 368(a)(1)(C) Ex. 3, (a)(2)(G)(i) Ex. 3, (b)(2) Ex. 3

 
 
 

Assumptions:  B, not a shareholder of T, is a creditor of T, owed 50.  T pays B in satisfaction of that debt pursuant to the plan of reorganization.

 

Treatment:  The transaction is a C reorganization.  368(a)(1)(C).  As a necessary component of a C reorganization, T must distribute the stock, securities and other properties it receives, as well as any other assets it has (here, there are no other assets, all T assets having been transferred to P).  While T did not distribute the 50 cash received from P to A, it did distribute to B, a creditor, pursuant to the reorganization and this will qualify for purposes of satisfying 368(a)(2)(G).

 

T will not recognize gain on its exchange with P.  While T would generally recognize realized gain to the extent it does not distribute boot received, 361(b)(1), a transfer of boot to creditors pursuant to the reorganization will suffice for this purpose.  368(b)(3).  T does not have a realized gain on the transfer of cash to B in satisfaction of the debt. 

 

Both T, the corporation whose assets are being acquired, and P, the acquirer of those assets, are considered parties to a reorganization.  368(b)(2).

 
 
 (c) Control defined
 For purposes of part I (other than section 304), part II, this
 part, and part V, the term ''control'' means the ownership of stock
 possessing at least 80 percent of the total combined voting power
 of all classes of stock entitled to vote and at least 80 percent of
 the total number of shares of all other classes of stock of the
 corporation.
 

Sections 368(a)(2)(H)(i), (c) Ex.1

 
 
 
 

Assumptions:  The transaction is pursuant to a plan of reorganization.  T pays off its liabilities with its available cash.

 

Treatment:  The transaction is a non-divisive D reorganization, having satisfied 354(b).  One of the requirements for a D reorganization is that immediately after the transaction the transferor (here T) or its shareholders (here A) control the transferee (here P).  Here, A owns 100 of the 150 P shares outstanding following the transaction.  Control is generally defined as ownership o stock possessing at least 80% of the total combined voting power of all outstanding classes and at least 80% of each other class of stock.  368(c). This definition is modified, however, in the case of non-divisive D reorganizations.  368(a)(2)(H)(i) such that the 304(c) definition of control is instead used.  304(c)(1) generally defines control as ownership of stock possessing at least 50% of the total combined voting power or 50% of the total value of all classes of stock.  And so here, while A does not satisfy the 368(c) definition of control, A does satisfy the 304(c) definition, thereby satisfying the control requirements of 368(a)(1)(D).

 

 

 

Section 368(c) Ex. 2

 

 

 

 

Assumptions:  For both T and X, Class A common is voting and Class B common is non-voting.  The exchange for T stock is unrelated to the exchange for X stock.

 

Treatment:  P's exchange of its stock for T stock is a B reorganization (368(a)(1)(B)) while its exchange of its stock for X stock is not any kind of reorganization.  In order to qualify as a B reorganization the acquirer (here, B) must control the target afterwards.  P controls T afterwards - P owns stock representing 100% of the T voting power and 80% of each non-voting class of stock.  368(c).  P does not control X afterwards - while P owns stock representing 100% of the X voting power.  P owns 0% of each non-voting class of X stock.