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Accounting, Finance, SPSS
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Reorganizations and Consolidated Tax Returns Accounting, Finance, SPSS

Research Paper Instructions:

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.
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.

 

8/9/2020 Week 7 – ACC565004VA016-1206-001 https://blackboard.strayer.edu/webapps/blackboard/content/listContent.jsp?course_id=_276006_1&content_id=_31954359_1&mode=reset 1/1 Reorganizations and Consolidated Tax Returns Overview 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 1. 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. 2. Suggest the type of reorganization the client should use for the ABC Corporation based on your research. Justify the response. 3. 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. 4. 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. 5. Create a scenario that will allow the client to reduce any disadvantages from filing a consolidated return as a member of a controlled group. 6. 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. 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. 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:

Research Paper Sample Content Preview:

Reorganizations and Consolidated Tax Returns
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Reorganizations and Consolidated Tax Returns
Expanding a business usually entails significant changes in the manner in which the company is managed. Management requires dedicating more energy, time, and money to various operations, and reorganization plays a crucial role in helping a company to utilize its resources wisely. While many companies reorganize in an attempt to overcome financial predicaments, restructuring is not only for sinking businesses. The process can be undertaken by a company to cope with additional growth or a firm anticipating to acquire or merge with another company. Different types of reorganizations, including type A, B, C, and D in consolidations and mergers, are discussed in detail below.
1 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.
As far as consolidation is concerned, reorganization refers to the process by which a company acquires new entities in deals that involve nontaxable transactions. Laws governing the reorganization process are well stipulated in section 368 of the United States tax law codes. There are four different types of reorganization, which include type A, B, C, and D.
Type A reorganization is a type of acquisition where the acquirer does not inherit the liabilities of the acquired company immediately (Swartz, 2015). Normal mergers entail liabilities of acquired company being transferred to the acquirer, and in instances when the former has huge tax liabilities, the former is expected to clear them with the Internal Revenue Service (IRS). Type A reorganization allows corporations to avoid being taxed by deferring the taxable income to capital gains in the financial statements as stipulated in section 368 (Hoffer & Oesterle, 2013). Hence, a company is able to legally avoid tax when it uses type A reorganization. Apart from being exempted from the target company liabilities, acquirer enjoys the benefits of avoiding a tedious and complex process involving approval by shareholders of the target company, which saves a great deal of time and paperwork (Swartz, 2015). On the other hand, Type B reorganization entails the management taking advantage of the voting stock of acquiring company to obtain the stock of the target entity. In this form of arrangement, if the acquirer possesses over 80% of the target company’s stock, it obtains the power to convert this firm into its subsidiary (Swartz, 2015). Type B allows restriction of voting rights of the target company, giving acquirer the full control. Here, corporations benefit tax-wise as a result of deferring of the capital gains for taxation-related issues. Under the normal circumstances, acquiring another company involves taxable transactions, but type B reorganization exempts acquirer from paying tax. Type C reorganization refers to a phenomenon where the target entity is liquidated, and acquirer’s shareholders purchase its shares (Swartz, 2015). Thus, the assets of the company being acquired are possessed by the acquirer, but the stock still belongs to the former shareholders of the acquired entity. Type C organizati...
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