Consolidating company liquidation
However no shareholder who votes against the transaction is required to accept shares in the surviving or successor corporation. publicly- held shares of a takeover target by its management or some other "inside" group, usually through undertaking substantial debt (hence, the "leverage") in order to take the company "private" and avoid a hostile takeover by an outsider.
In my previous article I introduced the world of group accounts and consolidation to you.
In this example, management in the older firm may feel more comfortable with operating under strict administrative hierarchies, while the start-up company may have preferred less administrative authority over operations.
A contractual and statutory process by which one corporation (the surviving corporation) acquires all of the assets and liabilities of another corporation (the merged corporation), causing the merged corporation to become defunct.
Consolidated business can obtain cheaper financing if the consolidated entity is more stable, more profitable, or has more assets to use as collateral.
It may also be able to use its larger size to extract better terms from suppliers because it will be able to buy more units.
1504(a)(2) (generally 80% by voting power and value) and the distribution was made in complete cancellation or redemption of all the stock of the liquidating corporation. 1.1502-34 permits shares of stock owned by two or more members of the group to be aggregated in order to determine whether the required stock ownership threshold has been satisfied. 332 stock ownership requirement, as well as other provisions of the Code not relevant to this discussion. 337(a) generally provides that the liquidating corporation does not recognize gain or loss on the distribution to the 80% distributee of any property in a complete liquidation to which Sec. For example, assume that 80% of a subsidiary’s ( would be required to recognize gain or loss on the distribution of all its assets to both shareholders. 332 liquidation, the parent corporation succeeds to and takes into account 22 specific tax attributes as set forth in Sec. These attributes include earnings and profits (E&P), net operating loss (NOL) carryovers, capital loss carryovers, unused tax credits, methods of depreciating assets, and other methods of accounting, including income that has been received by an accrual-method taxpayer for goods and subscriptions but not earned, and thus deferred under Secs. The Service issued proposed regulations in February 2005 that applied the single-entity principles of taxation for allocating the intercompany items of a liquidating subsidiary where multiple members acquire the assets of a liquidating subsidiary in a complete liquidation to which Sec. The proposed regulations allocated the items of the liquidating corporation to the various distributee members in a manner such that these items could be used to offset the income or tax liability of the group or to each distributee member to the extent that such items would have been reflected in investment adjustments to the stock of the liquidating corporation owned by such distributee member under Regs. Because of the perceived lack of clarity in the proposed regulations, and based on comments received by the IRS, the final regulations made certain revisions to the proposed regulations. The final regulations provide rules for succession to the following attributes: The E&P of the subsidiary is allocated proportionately to the distributee members based on the relative FMV of the liquidating corporation’s stock owned by each such member.
Many of the consolidated return rules are premised on the goal of treating the various corporate members of the consolidated group as if they were divisions of a single corporation. In the latter case, the consolidated return intercompany transaction rules would defer the recognition of ’s gain or loss until a later time. 332 liquidations generally are limited to a transfer of assets from one corporation to an 80% controlled corporation, the Code regards the parent as a successor to the subsidiary for many income tax purposes. The final regulations provide more definitive guidance in this area but specifically provide no rules regarding the application of the successor rules for “intercompany” items as outlined under Regs. If the subsidiary is also a member of the consolidated group, its E&P would already have been reflected, in whole or in part, in the E&P of the higher tier members.
All of the authorities that permit the use of a deferral method for unearned income require that the income be recognized if the taxpayer is relieved of its obligation to perform the services or provide the goods. 381(a), the IRS permits the income to continue to be deferred in the hands of the transferee. 332(a) does not apply in determining the recognition or nonrecog-nition of any income realized by the non-80% distributee attributable to its assumption of an obligation or liability related to the deferred income because such income is not gain or loss recognized with respect to the liquidating corporation’s stock.
The consolidation of several business units or several different companies into a larger organization.
Business consolidation is used to improve operational efficiency by reducing redundant personnel and processes.
Adjustments to that E&P are necessary to prevent the E&P from being duplicated in the higher-tier members by reason of the liquidation.
All credits, including general business credits and the minimum tax credit under Sec.