Lexis Explanation IRC Sec. 355(e)


Summary

  • IRC § 355(e)
    Distribution of Stock and Securities of a Controlled Corporation
    Recognition of Gain on Certain Distributions of Stock or Securities in Connection with Acquisitions
        Synopsis
      •  I.Spin-Off of an Unwanted Business Preceding a Tax-Free Sale
        •  A.Pre-1997: Morris Trust Transactions
        •  B.Post-1997: Prohibition of Plan of Acquisition at Time of Spin-off
          •  Predecessors, Successors, and Limitation on Gain Recognition
          •  1.Treasury Regulation Safe Harbors
          •  2.Possibility of Tax-Free Transaction When Transaction Does Not Meet Safe Harbor Requirements
    •  I. Spin-Off of an Unwanted Business Preceding a Tax-Free Sale

      If a spin-off precedes a taxable sale of either the distributing or the distributed corporation, the spin-off is likely to be taxable pursuant to IRC Section 355 due to the "device" limitation.(1)Link to the text of the note This was not always the case. In fact, until 1997, tax practitioners could design spin-offs before tax-free acquisitions of the distributing corporation, ...