TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Wednesday, March 28, 2012

Cash D Reorgs and Basis

Tax AnalystsLewis J. Greenwald & Christopher M. Flanagan (both of Sullivan & Worcester, Boston), New U.S. Regs Confirm That Basis Is Lost in Some Cash D Reorgs, 65 Tax Notes Int'l 1091 (Mar. 26, 2012):

On November 18, 2011, the IRS and Treasury released temporary and proposed regulations for determining the basis of stock or securities deemed to be received in certain D reorganizations. The 2011 regulations confirm what many taxpayers had feared — that some cash D reorganizations do indeed result in the loss of basis in the transferor corporation’s stock.

To best explain the full import of the 2011 regulations, this article first contains a discussion of D reorganizations generally. It then examines the regulations relating to D reorganizations issued by the IRS and Treasury on December 19, 2006 and those issued on December 18, 2009. Together, those regulations formed the basis for applying some of the technical requirements for D reorganizations to cash D reorganizations, and they serve as precursors to the 2011 regulations. Finally, this article reviews the 2011 regulations and the resulting potential for the loss of basis thereunder.

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As an FYI, this article originally appeared in in the 2/20/2012 edition of Tax Notes.

Posted by: M&A Guy | Mar 28, 2012 6:30:15 AM