Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(j) MERGERS AND REORGANIZATIONS
395.2115 Reorganization. A corporation is considering a tax-free restructuring under Internal Revenue Code section 351. As a result of the reorganization, the new corporation (new company) will become an operating company and will conduct the same operations as the former operating company. The former operating company (old company) will become a holding company. The new company will assume the name of the old company and the old company will change its name. The old company will transfer its operating assets to the new company in exchange for stock in the new company.
There is no tax due on the transfer of assets from the old company to the new company since the transfer of assets is to a commencing corporation in exchange solely for first issue stock (no other consideration involved). (Regulation 1595(b)(4).)
However, if the transfer constituted 80 percent or more of the assets held or used in all of old company's activities which required a seller's permit, the transfer would qualify as an occasional sale under Regulation 1595(b)(2) even if the old company received other consideration, such as the new company's assumption of indebtedness. 5/2/88. (Am. 2000–1).