M&A

Consistency of Ownership  The court looked at the taxpayer’s argument that this should be a liquidation, primarily because it did not qualify for redemption status. The taxpayer pointed to the fact that in order for a transaction to qualify as a redemption there must be a “consistency of ownership”.

Attribution Rules  Section 318(a)(1)(A) directs that an individual is considered to own the stock of his or her parents or child; “in general, an individual shall be considered as owning the stock owned, directly or indirectly, by or for […] his children, grandchildren, and parents.

Analysis  In this specific case, the taxpayer was trying to escape the realm of tax-free organizations. The taxpayer wanted the step up in basis that a purchase of assets would provide.

Acquiring the assets of another corporation, in a tax free transfer, and provided that the owner of the transferring corporation also owns the acquiring corporation is considered a “type D” reorganization.