Tsn liquidating corporation laila ali dating
The Court applied the step-transactiondoctrine in determining that the merger and post-transactionsale were interdependent steps and that the target shareholdersdid not plan to continue as investors at the time of themerger. the Tax Courtconcluded that sales by public shareholders, prior to areorganization, may be ignored when considering the COIrequirement. Treasury and IRS officials have stressed thatthis "deemed stock" rule is solely for the purpose ofdetermining whether section 356 applies, and no stock is treatedas received by the target shareholder for any other purpose. Because the new final pre-reorganization regulationsfocus on whether section 356 applies, taxpayers must analyzeeach transaction under relevant authorities, including the step-transactiondoctrine and authorities such These authorities generally analyzewhether a redemption or distribution is a separate transaction(treated as a redemption under section 302 and/or a distributionunder section 301), or part of a sale or reorganization (treatedas part of the sales price or boot in the reorganization undersection 356). Commentators suggested that the source of funds usedby the target corporation to redeem its shareholders should beanalyzed in order to determine whether a redemption shouldadversely affect continuity of interest. 568 (stating that "[s]ales, redemptions, and other dispositions of stock occurring prior or subsequent to the exchange which are part of the plan of reorganization will be considered in determining whether" the continuity of interest requirement is satisfied). However,the Service seemed to conclude that since the target corporationand acquiring corporation are combined economically, they shouldbe treated as one entity. In addition, the Service argued that"a tracing approach would be extremely difficult toadminister." One area of particular concernto many taxpayers was whether S corporations should be treatedthe same as C corporations with respect to the new extraordinarydistribution rules.
However, post-reorganization sales of stock willnot destroy continuity, as long as such sales are not to theissuing corporation or a party related to the issuingcorporation.. 13 Seagram attempted to argue that the transaction was taxable, as it had paid a premium for the Conoco stock, and wanted to deduct its loss upon its exchange of Conoco stock for Du Pont stock. Thus, thehistoric shareholders of the target corporation must have acontinuing interest in the target assets and target businessthrough the acquisition of the stock of the acquiringcorporation. This requirement has its origins in cases datingback to The Internal Revenue Service ("Service" or "IRS")considers the continuity of interest requirement as satisfiedif, following the transaction, historic shareholders of thetarget corporation hold stock of the acquiring corporation (as aresult of prior ownership of target stock) representing at least50% of the value of the stock of the target corporation. 19 Note that the new COI regulations do not apply to section 368(a)(1)(D) reorganizations or section 355 transactions. Under the final regulations, dispositions of stock ofthe target corporation prior to a reorganization to personsunrelated to the target or issuing corporation is disregardedfor purposes of the COI requirement. Under the temporaryand proposed regulations (applicable prior to the date the August 2000 final regulations are filed with the federalregister), a reorganization generally fails the COI requirementif, prior to and in connection with a reorganization, aproprietary interest in the target corporation is redeemed, orprior to and in connection with a reorganization there is anextraordinary distribution made with respect to such proprietaryinterest. 1415 (1987) (holding that a post- acquisition sale did not destroy COI because the targets shareholders did not decide to sell their stock until after the acquisition).
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The Tax Court concluded that Seagram "stepped into the shoes" of 32% of the Conocoshareholders.