- Reorganizations and Consolidated Tax Returns
Overview
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 a 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.
- Instructions
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. Be sure to use the six-step tax research process in Chapter 1 that was demonstrated in Appendix A of your textbook as a guide for your written response.
Write a 4–6 page 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.
- Use the six-step tax research process located in Chapter 1 and demonstrated in Appendix A of the textbook to record your research for communications to the client.
- This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
- Create a recommendation for a reorganization and acquisition structure that addresses value and limitations
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