Current Development in Corporate Reorganizations
BY LAURENCE O. EAMES Principal, Washington Office
Presented before the University of Virginia Tax Conference, Charlottesville—June 1959
THE Internal Revenue Code of 1954 made very significant changes
in the 1939 Code although many of the provisions are not fundamentally
different. Actually, the structure of Subchapter C is much easier to work with than the prior rules because the separate parts are arranged and integrated in a more reasonable order.1
Some construction problems may be encountered, however, with the provisions of section 368. Note particularly the caption "Definitions
Relating to Corporate Reorganizations." The key word is Definitions. A transaction is not nontaxable simply because it meets a definition. For example, a transaction embracing a statutory merger might be the complete liquidation of a subsidiary and thus we would only be concerned with two sections of the Code.2 Where the transaction
does not concern an existing parent and subsidiary corporation
or this status can not be imputed, then several provisions of the Code must be consulted before we can establish that the transaction is not taxable.3 We should look to these other sections and not to the definitions to establish whether a transaction is taxable or nontaxable.
Often it is helpful to disregard the definitions until time to test the conclusion. Stated another way, it is easier to end with, rather than to start with definitions.
Within the last year ten revenue rulings have been published that made reference to the reorganization provisions of the Code. As you might suspect, many of these rulings dealt with the results of a reorganization rather than with the issue of whether or not a plan
1 For example, see the provisions for Common Nontaxable Exchanges, Part III
of Subchapter O. Similar provisions were contained in sections 112 and 113 of the
1939 Code together with the reorganization provisions and other provisions
dealing with the basis and recognition of gain or loss.
2 Sections 332 and 368 (a) (1) (A).
3 Generally this would relate to sections 354 (a) (1), 361 (a) and 1032 (a).
RECENT REVENUE RULINGS