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.

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• 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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