"D" Reorganization

* Acquisitive "D" reorganization

* Divisive "D" reorganization: "Spin-off" and "Split-off"

Acquisitive "D" Reorganization


* Corporate T contains the assets of former corporation A and of T.

* Corporation A goes out of existence Corporation A's share holders control Corporation T.

Requirements for Divisive "D" Reorganization imposed by IRC ยง355

* Distribution of Control -by the original corporation to its shareholders

* Character of Distribution - stock or securities of the newly created subsidiary.

* Active Business Immediately -original corporation and the controlled subsidiary.

* Not as Tax Avoidance Device.

Spin-Off (Divisive I'D" Reorganization)


A spin-off is the same as a split-off (see Exhibit 7-10), except that A's shareholders receive shares of B stock, but do not turn in any of their shares of A stock. The spin-off transaction is often used when management decides that corporate operations should be divided but the shareholders want to continue an investment in both the original and new corporation.

Split-Off (Divisive " D" Reorganization)

When shareholders prefer different investments in the future operations of the corporation, a split-off is used. In a split-off, the original corporation transfers some of its assets to a newly formed subsidiary in exchange for all of the subsidiary's stock, which it then distributes to some or all of its shareholders in exchange for some portion of their original stock. As a result, the two corporations are held by the original shareholders but in a proportion that differs from that which they held in the original corporation.


* A Corporation transfers part of its assets to B Corporation in exchange for B corporation stock.

* A's shareholders exchange part of their A stock for B stock.

Split-up (Divisive "D" Reorganization)


* A Corporation transfers all of b assets to B and C Corporations in exchange for all of the stock of B and C.

* A Corporation then exchanges all of the B and C stock for its own stock and a dissolves.

* After the reorganization, A no longer exists, and A's shareholders are now the shareholders of B and C Corporations.

Proceed to "EFG" Reorganization

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