ACC565 Strayer Reorganizations and Consolidated Tax Returns

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Suppose you are a CPA, and you have a corporate client that has been operating for several years. The company is considering expansion through reorganizations. The company currently has two (2) subsidiaries acquired through Type B reorganizations. The client has asked you for tax advice on the benefit of a Type A, C, or D reorganization over a Type B reorganization. Additional facts will be uploaded.

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JesseCraig
School: University of Virginia

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Running head: REORGANIZATIONS AND CONSOLIDATED TAX RETURNS

REORGANIZATIONS AND CONSOLIDATED TAX RETURNS
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REORGANIZATIONS AND CONSOLIDATED TAX RETURNS

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REORGANIZATIONS AND CONSOLIDATED TAX RETURNS
1. Comparison of the long-term tax benefits and advantages of reorganization type, and
recommendation of the most beneficial to the client.
A reorganization is a concept of the acquisition of an entity acquiring new entities by
considering transactions that are not tax bearing. The US law for companies recognizes the
purchase and transfer of new assets by corporations using this technique. Section 368 of the
Internal Revenue Service (IRC) makes provisions for reorganizations. The code classifies
reorganizations into four broad categories that are, category A, B, C, and D. The description of
each type of restructuring follows. Kind A reorganization provides for the acquisitions in the form
of consolidations and mergers (Marimuthu, 2009). Type B denotes a reorganization that uses the
controlling interest (voting power) of an organization that is being reorganized to purchase the
shares of the company under acquisition. Type C reorganizations depict a company under purchase
getting liquidated, and the stockholders of the purchasing company acquire the stock of the target
company. Type D is a category of reorganization form that utilizes division and acquisition as the
primary method for the reorganization.
The transaction of the four categories of reorganizations has no tax bearing during the
acquisition of new companies. However, there is the condition of ensuring that every aspect of the
regulations governing the changes is strictly adhered to so to ascertain the intended tax benefits
provided. Each of the four types of reorganizations constitutes a unique set of advantages
especially long-term tax benefits accruing its resultant structure. As explained earlier, type A
restructuring encompasses provisions for mergers. Under this reorganization, a company acquiring
another does not transfer the liabilities of the purchased company, and this makes the merger a
secure transaction with the merger. This merger is contrary to the ordinary ones in which

REORGANIZATIONS AND CONSOLIDATED TAX RETURNS

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obligations of there is a transfer of the liabilities of the transferor. Another merit of this type is that
it is simple to make the transfer without strenuous consent from shareholders and numerous
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