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Article: Acquisition of holding company assets by less-than-80 percent-owned subsidiary should satisfy COBE requirement.(continuity-of-business-enterprise rule)
- Article from:
- The Tax Adviser
- Article date:
- June 1, 2001
- Author:
CopyrightCOPYRIGHT 2001 American Institute of CPA's. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The tax law is not clear as to whether the acquisition of the assets of a holding company by its less-than-80%-owned subsidiary satisfies the continuity-of-business-enterprise (COBE) requirement, a necessary element to qualify the acquisition as a tax-free reorganization. A recent Tax Court case provides additional support to the implicit direction of the IRS that such an acquisition should satisfy the COBE requirement.
For a transaction to qualify as a tax-free reorganization under Sec. 368, an acquiring corporation must satisfy the COBE requirement; see Laure, 653 F2d 253 (6th Cir. 1981), and Regs. Sec. 1.368-1(b). The acquiring corporation must either continue ...