Suppose you are a CPA, and you have a corporate client that has been operating for several years. The company is considering expansion through reorganizations. The company currently has two subsidiaries acquired through Type B reorganizations. The client has asked you for tax advice on the benefit of Type A, C, or D reorganization over a Type B reorganization. Additional facts regarding the issues are reflected below.

The company currently files a consolidated income tax return with the two subsidiaries acquired through a Type B reorganization. ABC Corporation, a subsidiary targeted by the client for takeover, has substantial net operating losses. XYZ Corporation and BB Corporation will be acquired as subsidiaries in the next six months.

Use the Internet and Strayer Library to research the rules and income tax laws regarding Types A, B, C, and D reorganizations and consolidated tax returns. Write a paper in which you:

Compare the long-term tax benefits and advantages of each type of reorganization and recommend the type of reorganization that will be most beneficial to the client.

Suggest the type of reorganization the client should use for the ABC Corporation based on your research. Justify the response.

Propose a taxable acquisition structure for the client’s planned acquisitions over a nontaxable reorganization.

Assess the value of a taxable transaction over a nontaxable reorganization for the client.

Examine the value and limitations of including the ABC Corporation if acquired as a wholly-owned subsidiary in the consolidated return and provide a recommendation to your client. Support the recommendation with applicable research.

Create a scenario that will allow the client to reduce any disadvantages from filing a consolidated return as a member of a controlled group.

Create a recommendation for a reorganization and acquisition structure that addresses value and limitations.

Answer rating: 100% (QA)

1 Comparing the longterm tax benefits of each type of reorganization and recommend the most beneficial type of reorganization Suggested reorganization for the ABC Corporation Section 368 of the IRS Re... View the full answer