Tax-Deferred Acquisitive Reorganizations for C Corporations

Abstract

This technical note outlines the general judicial requirements an acquisition must meet to qualify as a tax-deferred reorganization. The variation in the specific requirements that must be met to qualify for different types of tax-deferred (“A,” Forward Triangular “A,” Reverse Triangular “A,” “B,” and “C”) reorganizations are addressed. Finally, the specific tax consequences to the target's shareholders and acquirer are outlined, and a numerical example illustrates the calculation of the after-tax proceeds to the target's shareholders and the after-tax cost to the acquirer. Excerpt UVA-F-1863 Rev. Aug. 30, 2019 Tax-Deferred Acquisitive Reorganizations for C Corporations Introduction You lead a company and want to expand. You have a target (T) company in mind and your team has estimated the price T's stock may be worth. You know the estimate is merely preliminary because the structure of the deal affects the ultimate “value of the deal” to both parties. A key factor that affects the ultimate value of the deal to the parties is the tax consequences. Before you determine the price you are willing to pay, there are two questions to ask that highlight the tax consequences of the deal for T and the acquirer (A) (see Exhibit1 for a summary): What are T's shareholders receiving (cash or stock)? . . .