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Perspectives

M&A Tax Talk: Navigating M&A during a recession

Tax implications and opportunities of M&A in a distressed market

In the midst of a rapidly changing US market, during the COVID-19 pandemic, companies may be assessing how to monetize losses, considering raising or restructuring debt, or planning for a divestiture or acquisition of underperforming assets. It is more important than ever for organizations to have timely tax planning to capture value and manage risks.

Can a business be brought out of corporate solution tax-free? A Reverse Morris Trust transaction may be the only answer

May 2020

In the world of taxation for business entities, a single level of taxation is ideal. Unlike “flow-through” entities, a C-corporation generally results in two levels of taxation. These distinct levels of taxation apply to both operating income and income gained from the disposition or distribution of assets held by the C-corporation. Accordingly, C-corporations have been compared to lobster traps: Easy to enter and painful to get out of. To bust the corporate lobster trap, a Reverse Morris Trust (RMT) transaction may be the only answer.

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Tax sharing agreements help address tax refunds for consolidated groups

May 2020

Recent developments have highlighted the importance for consolidated groups to have a tax sharing agreement (TSA) in place that clearly and explicitly addresses the question of which member of the group is entitled to a refund of previously paid income taxes. Such developments include the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the recent US Supreme Court decision in Rodriguez v. FDIC.

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Tax-free spin-offs for pre-revenue businesses

April 2020

The tax-free spin-off rules provide the ability for a corporation to separate its businesses without corporate or shareholder-level tax. However, pre-revenue businesses were generally excluded from these types of transactions because of their inability to satisfy the “active trade or business requirement” (ATOB) to obtain tax-free treatment. However, under new guidance, this may no longer be the case, opening the door for more businesses to engage in these types of transactions.

Protecting tax attributes in an uncertain environment

April 2020

The increased likelihood of companies generating net operating losses (NOLs), coupled with depressed stock prices for those companies resulting from recent economic disruptions, has caused companies’ executives and tax professionals to consider implementing defensive measures, such as stock transfer restrictions or “poison pills,” to protect NOLs and other tax attributes from the adverse impacts of an "ownership change".

The IRS and Treasury issue significant revisions to the applicability date provisions of the proposed section 382(h) regulations

April 2020

As previously discussed in the October edition of Deloitte’s M&A Tax Talk Series, the Treasury and the IRS issued proposed regulations in September 2019 regarding a corporation’s ability to utilize net operating losses (NOLs) and other tax attributes following an ownership change within the meaning of section 382. In January, the Treasury and the IRS issued significant revisions to the applicability date provisions of these proposed regulations.

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The IRS and Treasury issue significant revisions to the applicability date provisions of the proposed section 382(h) regulations

Our M&A Tax Talk Distressed Market miniseries is designed to provide your organization with the “big picture,” and to share key insights into the latest tax considerations, rules, and traps so you can confidently execute your business strategies in a distressed and volatile marketplace.

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