This outline discusses, in plain English, the regulatory provisions called into play under IRC § 367(b) on acquisitive mergers and other non-divisive corporate reorganizations. A Section 367(b) acquisitive reorganization commonly involves some form of internal restructuring within a single controlled group, or in rarer cases, a third-party reorganization in which a U.S. shareholder receives a foreign corporation’s stock. Note that § 367(b) also applies to divisive reorganizations (i.e., spin-offs) involving CFCs and other spin-offs with a cross-border element. These spin-off rules under § 367(b) are not discussed here, as the author has written a comprehensive treatment of those rules through the RIA Checkpoint Catalyst system. (See Checkpoint Catalyst, Topic #132). Readers desiring reference material on that subject are directed there.
The basic categories of transactions covered by this outline may be summarized as follows:
- So-called Domestication transactions, in which a U.S. corporation acquires the assets of a foreign corporation in a § 381 transaction (Part II—or Reg. § 1.367(b)-3);
- De-controlling exchanges, in which a U.S. corporation or its CFC exchanges stock in a CFC for stock in a foreign corporation which is not a CFC (Part III—Reg. § 1.367(b)-4);
- Foreign-to-foreign liquidations and reorganizations, in which the E&P and tax attributes of one foreign corporation carry over to another foreign corporation (Part IV—Reg. § 1.367(b)-7); and
- Leveraged triangular reorganizations or so-called “Killer B” transactions in which a subsidiary purchases its parent’s stock for a note or other property to effect a triangular reorganization (Part V—Reg. § 1.367(b)-10 and IRS Notice 2014-32). Unlike the other categories of § 367(b) transactions, this rule may also apply in the inbound fact pattern of a foreign parent with a domestic subsidiary.
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