Reorganizations and Consolidated Tax Returns

Reorganizations and Consolidated Tax Returns

ACC 565 – Organizational Tax Research and Planning

Prof. JAMES WRIGHT, CPA

Strayer University – On Line

Luis A. Zapata

May 26th 2014

Tesacco, Lalana , Del Hoyo and Zapata, CPA

1496 Brickell Avenue

Miami, FL 33131

May 25th, 2014

Mrs. Carmen Delano Chiquito

Agarro Bien Cunegrito ABC, LLC

17405 NW 82nd Street

Medley, FL 33178

Dear Mrs. Delano,

Thanks for the opportunity to serve you, recently you informed us about your intentions for expand your business through reorganizations. Hereinafter you will find our opinion based on best knowledge about this matters and your particular situation.

The acquisition of entities through non-taxable transactions is called the reorganization of the corporations and is dealt with according to the section 368 of the U.S. code of Internal Revenue Service and could be summarize as follows:

Structure | Advantages |

Statutory Merger or Consolidation | * Flexibility in the form of consideration (no voting stock requirement; up to 60% boot can be used) * Tax-free status not affected by disposal of unwanted assets * Eliminates minority or dissenting shareholders |

Forward

Triangular

Merger | * Flexibility in the form of consideration * Target's liabilities isolated in a subsidiary |

Reverse

Triangular

Merger | * Up to 20% boot can be used * Target's liabilities isolated in a subsidiary * Non-transferrable assets and contracts are not lost |

"B" Reorganization | * Target's liabilities isolated in a subsidiary * Non-transferrable assets and contracts are not lost * No "substantially all" requirement |

"C" Reorganization | * Acquirer can be selective in choosing the liabilities it assumes |

All the reorganizations mentioned here are the non-taxable transactions and does not carry any tax implication for the execution of transactions if the rules laid out by the said section are followed.(Bloomberg BNA, 2014). There can be...