F Reorganizations and Other Tax Planning for S Corporation Acquisitions and Investments

S corporation shareholders will generally prefer the tax treatment afforded to them in a stock sale, whereas buyers will want to structure S corporation acquisitions to achieve a stepped-up tax basis in the S corporation's assets. To obtain a step-up in the tax basis of the S corporation's assets, buyers may consider structuring the acquisition as a deemed asset sale by negotiating with sellers to make an election under Sections 338(h)(10) or 336(e). However, such elections impose strict requirements and significant limitations. As an alternative to elections made under Sections 338(h)(10) or 336(e), tax-free reorganizations under Section 368(a)(1)(F) ("F reorganizations") can also provide a basis step-up to buyers. An F reorganization is defined under Section 368(a)(1)(F) as "a mere change in identity, form, or place of organization of one corporation, however effected." Six requirements must be met under the Treasury regulations to effect these reorganizations. Revenue Ruling 2008-18 and other IRS guidance outline the sequence of steps that should be followed to ensure the S corporation election remains intact after the F reorganization.

F reorganizations can be used to mitigate against the risk that a target's S corporation election is invalid or terminated, to facilitate equity rollovers by sellers, and to enable investments from disqualified S corporation shareholders.

Pass-through entities and corporate tax advisers need to comprehend the tax benefits and caveats of F reorganizations.

Listen as our panel of experts explains how to utilize F reorganizations to solve common problems in S corporation investments and acquisitions.

I. S corporations: an introduction

II. Considerations for S corporation buyers and investors

III. Considerations for S corporation shareholders

IV. Section 338(h)(10) and Section 336(e) elections

V. Common issues with S corporation elections

VI. F reorganizations: an introduction

VII. F reorganizations involving S corporations: Revenue Ruling 2008-18

VIII. Benefits and caveats to F reorganizations involving S corporations; comparison to elections under Sections 338(h)(10) and 336(e)

IX. Considerations for purchase and sale agreements

X. State tax considerations

XI. International tax planning and F reorganizations involving S corporations

XII. Estate planning and F reorganizations involving S corporations

XIII. Tax return reporting and compliance

The panel will cover these and other critical issues:

• Practical uses of F reorganizations for S corporation issues
• F reorganizations compared to elections under Section 338(h)(10) and 336(e) to treat stock purchases as asset purchases
• Structuring an F reorganization to ensure an S election remains intact and the business retains its EIN
• Meeting the six requirements under the Treasury regulations for F reorganizations
• Examples detailing common F reorganization scenarios

Learning Objectives

After completing this course, you will be able to:

• Identify the six requirements under the Treasury regulations for F reorganizations
• Determine how F reorganizations are used to relocate an entity
• Decide when shareholders could benefit from an F reorganization
• Ascertain differences between F reorganizations and elections under 338(h)(10)

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).