What is a 355 transaction?
Section 355 transactions are often referred to generally as “spin-offs,” but can also be structured as “split-ups” or “split-offs.” A spin-off is the pro rata distribution of the stock of a corporation that is controlled by Distributing.
Does section 355 apply to S corporations?
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 …
What is a divisive D reorg?
For divisive D reorganizations, control means ownership of at least 80% of the total voting stock and at least 80% of the total number of shares of all other classes of stock (Sec. 368(c)). Under Sec. The distribution of the controlled corporations’ stock can be made on a pro rata or non—pro rata basis.
What is a Type A reorganization?
Type A reorganization is a “statutory merger. Usually, mergers/consolidations occur on a consensual basis where the owners/operators/management from the target business help those from the purchaser to ensure that the deal is beneficial and profitable for both parties.
What is a section 355 distribution?
Section 355 of the Internal Revenue Code (IRC § 355) allows a corporation to make a tax-free distribution to its shareholders of stock and securities in one or more controlled subsidiaries. The split-off resembles a redemption because the shareholders have relinquished stock of the distributing corporation.
What is a section 355 spin-off?
Section 355 of the Internal Revenue Code provides a powerful tool in corporate restructurings. A split-off occurs where the parent distributes stock of the controlled corporation to some of its shareholders in exchange for their stock in the distributing parent.
How do I sell shares of my S corp?
Steps to Sell an S-Corp
- Determine the value of ownership interest in the S corp. The shareholders of an S corporation are its members.
- Review the procedure for selling shares. An S corp.
- Draft and execute a stock purchase agreement.
- Record the ownership transfer.
What is D reorganization?
D-REORGANIZATIONS A D-reorganization is a transfer by a corporation of all or part of its assets to another. corporation if, immediately after the transfer, the transferor or its shareholders are. in control of the corporation to which the assets are transferred, but only if in pursu-
What is a cash D reorganization?
A D reorganization is a transfer by a corporation (the “Transferor Corporation”) of all or part of its assets to another corporation (the “Issuing Corporation”) if, immediately after the transfer, the Transferor Corporation, or one or more of its shareholders, is in control of the Issuing Corporation, but only if, in …
What is a Type C reorganization?
C-REORGANIZATIONS 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.
What is a reorganization?
A reorganization is a significant and disruptive overhaul of a troubled business intended to restore it to profitability. It may include shutting down or selling divisions, replacing management, cutting budgets, and laying off workers.
Are spinoffs taxable?
The taxable status of a spinoff is governed by Internal Revenue Code (IRC) Section 355. The majority of spinoffs are tax-free, meeting the Section 355 requirements for tax exemption because the parent company and its shareholders do not recognize taxable capital gains.