Obstacles on the road to tax-free spin-offs come into clearer focus after recent Regs
Article Abstract:
Section 355 is the only means corporations can use to divide and appreciate property to shareholders free of tax. Three types of distributions allowed under section 355 are: spin-offs, pro rata distributions of stock or securities; split-offs, non pro rata distributions; and split-ups, property transfers. Reasons section 355 distributions are acceptable include: key employees are buying controlled corporation or distributing corporation stock; regulatory burdens are being removed; and hostile takeovers are being defended. However, all such transactions must be substantiated. Shareholders must show a continuing equity interest following the reorganization or distribution, and the distribution cannot be a method for distributing controlled or distributing corporation earnings.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
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Recent changes affect selection of best method of accounting to report income and deductions
Article Abstract:
The Tax Reform Act of 1986 restricts accounting methods. The method selected must clearly reflect income in order to be accepted by the IRS. Permissible methods include the cash method of accounting, the accrual basis method, percentage of completion method, installment sales method, and the cost recovery method.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1987
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