02 May 2023
Reshuffling Your Capital Structure? Try an “E Reorganization” to Relieve Taxable Treatment
The purpose of a tax-free reorganization or restructuring is to acquire or dispose of assets of an entity without generating income and triggering a taxable event. An E Reorganization involves a single corporation that is undergoing a readjustment or reshuffling of its capital structure. Under I.R.C. § 368(a)(1)(E), the term "reorganization" includes a recapitalization. With a recapitalization, a corporation will either issue new stock in exchange for existing common stock or preferred stock, or will turn debtholders into shareholders, removing debt but reducing the ownership interest of preexisting shareholders.
Related Content
- Tax-Free Reorganizations (S Corporations)
Learn more about the federal income tax considerations when engaging in reorganization transactions under I.R.C. § 368(a) with an S corporation.
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- Business Entities. IRS obsoletes Rul. 58-74, which allowed taxpayers to file a claim for refund or amended return to deduct research or experimental expenditures that the taxpayer had failed to deduct for prior taxable years and for which the expense method under former I.R.C. § 174(a)applied. Rev. Rul. 2023-8.
- Business Entities. IRS and Treasury Department propose regulations that identify transactions that are the same as, or substantially similar to, certain micro-captive transactions as listed transactions, a type of reportable transaction, and certain other micro-captive transactions as transactions of interest, another type of reportable transaction. 88 Fed. Reg. 21547 (April 11, 2023).
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