The structure that you adopt for a corporate acquisition, combination or divestiture can have a material impact on your tax costs. If you are acquiring another business you may choose a structure that avoids immediate tax consequences to the seller but generally increases the tax cost to the buyer. Alternatively, you may choose a structure that maximizes the tax benefits to the buyer in future periods as a result of a step-up in the basis of the acquired assets, generally at the immediate tax expense of the seller. Consolidated return and net operating loss limitations may also come into play. If you are considering divesting a business, different tax structures are also available, each with its own tax costs and benefits.
In an area where form is often exalted over substance, Caplin & Drysdale attorneys can help you wade through the myriad of corporate tax provisions to fashion solutions that are innovative, reliable and addressed to your specific needs. Our partners have decades of experience working on complex corporate transactions for large and small businesses in a cross-section of industries. Before joining our firm, certain of our attorneys were involved in developing legislation and regulations in the corporate tax area.
In addition to helping you plan tax-efficient corporate transactions, our attorneys are adept at securing advance rulings from the corporate tax division of the IRS Chief Counsel's office. We have filed hundreds of ruling requests over the years and are well known among the IRS attorneys who work on rulings in the corporate tax area. We also have substantial experience handling corporate tax disputes with the IRS, including at the examination, technical advice, and Appeals Office levels.
Finally, we provide opinion letters on complex corporate transactions in lieu of, or as a supplement to, an IRS letter ruling. We apply the highest standard of care to the preparation of our opinion letters and often are called upon to give a "second" opinion on a transaction involving complex or novel legal issues. Representative Engagements
A mutual holding company is planning to demutualize, engage in a merger with its majority-owned insurance company, and acquire another insurance company in a sponsored demutualization. The objective is to structure the series of transactions as tax-free reorganizations, so that there is no tax cost to the corporate parties, and the policyholders who receive stock for their membership interests do not recognize any gain. The tax plan must take account of certain restrictions imposed by state insurance laws.
Result: Working with local insurance counsel, Caplin & Drysdale attorneys devise a plan involving a recapitalization of the holding company, an "upstream merger" of the insurance subsidiary that qualifies as an "A" reorganization, a recapitalization of the target company, and an acquisition of the target by a subsidiary of the demutualized holding company in a transaction that qualifies as an "(a)(2)(E)" reorganization. Caplin & Drysdale prepares ruling requests on certain aspects of the proposed transactions and renders a written opinion on other aspects for which rulings are not generally obtainable.
A publicly held company would like to unlock some of the value in its underlying assets by distributing a business unit to its shareholders. The objective is to effect the distribution on a tax-free basis to the company and its shareholders.
Result: Caplin & Drysdale attorneys begin their analysis by interviewing company personnel and outside advisors to ascertain whether there is a corporate "business purpose" for the transaction in addition to the shareholder enrichment purpose. Corporate business purposes include converting the business unit into a free-standing public corporation so that it can access the public markets directly, incentivize employees with its own stock, or make acquisitions with its own stock. To qualify the transaction as tax-free, the company must be prepared to implement one or more of these plans. Working with the company and its advisors, Caplin & Drysdale attorneys prepare a ruling request to the IRS Chief Counsel's office requesting rulings on the tax-free nature of the distribution. After the ruling is secured, Caplin & Drysdale works with the company in the implementation phase to assure that it complies with all of the requirements for a tax-free spin-off.
Our Services
- Planning corporate acquisitions, mergers, divestitures, etc.
- Assisting in analyzing complex corporate tax questions
- Obtaining letter rulings from the IRS
- Providing opinion letters and second opinions on corporate transactions
- Representing clients in tax audits
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