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When a corporation is sold, sellers often wish to defer the taxable gain on a sale...

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Accounting

When a corporation is sold, sellers often wish to defer thetaxable gain on a sale of shares. Under the US tax code, such gaindeferral may be accomplished through a tax-free reorganizationpursuant to IRC Sec. 368(a)(1). Please consider the commonrequirements (listed below) that each one of these reorganizationtypes must meet to qualify for tax-free treatment. Please selectone requirement and discuss how failure to meet the requirement maypreclude qualifying for a tax-free reorganization.

  1. Pursuant to plan of reorganization
  2. Continuity of interest
  3. Continuity of business enterprise
  4. Business purpose test

Answer & Explanation Solved by verified expert
3.9 Ratings (682 Votes)
Answer Tax exempt MA exchanges are considered rearrangements and are like assessable arrangements with the exception of that in redesigns the acquirer utilizes its stock as a huge bit of the thought paid to the merchant as opposed to money or obligation Four conditions must be made to qualify an exchange for taxexempt treatment under Internal Revenue Code sec 368 1 Pursuant to plan of reorganization Segment 368 of the Internal Revenue perceives three kinds of corporate procurement structures that qualify as assessment freeor charge conceded rearrangements Type A Reorganizationstockforresources securing Statutory MergerIn a statutory mergertarget investors trade the offers for acquirer stock and up to 60 boot coherence of premium prerequisite applies Statutory ConsolidationIn a    See Answer
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Transcribed Image Text

When a corporation is sold, sellers often wish to defer thetaxable gain on a sale of shares. Under the US tax code, such gaindeferral may be accomplished through a tax-free reorganizationpursuant to IRC Sec. 368(a)(1). Please consider the commonrequirements (listed below) that each one of these reorganizationtypes must meet to qualify for tax-free treatment. Please selectone requirement and discuss how failure to meet the requirement maypreclude qualifying for a tax-free reorganization.Pursuant to plan of reorganizationContinuity of interestContinuity of business enterpriseBusiness purpose test

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