Certain changes in corporate structure and place and form of incorporation can be effectuated tax free under Section 368 of the Internal Revenue Code. Section 368(a)(1)(F) allows for a tax free reorganization where there is “a mere change in identity, form or place of organization of one corporation, however effected.”
For example, for various reasons, a corporation organized in one state may want to be operate in another state and wants to transfer the corporate charter while retaining its corporate tax attributes, history and licenses.
Here are some of the tax requirements needed to effectuate this tax free reorganization.
All the stock of the resulting corporation must be issued in exchange for and in respect of the stock of the transferring (old) corporation.
There is no change in the ownership of the corporation in the transaction. So the shareholders who owned the old corporation must own the new corporation in the same proportions.
The transferring corporation must be completely liquidated to comply with the F reorganization rules. However, a legal dissolution of the transferring corporation is not required. This is a subtle legal distinction but allows the parties to comply here with only a liquidation. However, legal prudence would dictate in a complete dissolution in most cases.
The resulting corporation should not have any assets or engage in any activity before the F reorganization is undertaken.
As with any reorganizations under Section 368, the F reorganization must:
These and other reorganizations allow changes in corporate structure and place of incorporation on a tax-free basis if the proper steps and due diligence is taken to effectuate these transfers.
The usual warning is to not try this on your own, but have tax counsel assist you in these complicated and technical transactions that require compliance with both federal and state laws.
Steve is an excellent attorney who has provided help for my family personally for business, tax, and other services for many years. He is extremely knowledgeable and thorough, and is extremely good at explaining legal concepts to me in clear terms understandable to a non-attorney. It is difficult to pick only three attributes above, since Steve’s work meets most if not all of the attributes above. Jonathan Weiss
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I have always found Steve to be very responsive, accurate and creative in legal matters presented to him. He demonstrates a good business sense. We have collaborated on several highly technical issues over the years. I look forward to our continuing relationship.
Steven has been instrumental in helping my partner and I to create a secure and satisfying estate plan, which meets or exceeds all of our wishes and contains contingencies for everything from medical issues to wealth management and living wills. In this process, Steven has also become a friend. If you need Estate Planning, Tax Advice, a Will or a trust, etc., we highly recommend Steven Fromm, Esquire. He will listen and be sensitive to your unique situation.
Steve is an excellent attorney who has provided help for my family personally for business, tax, and other services for many years. He is extremely knowledgeable and thorough, and is extremely good at explaining legal concepts to me in clear terms understandable to a non-attorney. It is difficult to pick only three attributes above, since Steve’s work meets most if not all of the attributes above.
Steve is an excellent corporate attorney who has a deep understanding of corporate law, taxes and estate planning. He’s been extremely helpful to me in keeping my many companies and business ventures organized, focused and squeaky clean. He’s very strong in estate planning and wealth preservation as well. Finally, his follow through is air tight and utterly dependable.
Steven is a trusted adviser. We depend on him for so many things. He is patient, listens to our needs and makes excellent suggestions. He is extremely talented. We value his advice and have recommended him unhesitatingly to friends and family.
Steve Fromm is a superb lawyer and I highly recommend him! After a terrible experience with a previous lawyer concerning an estate administration, I entered his office feeling very deflated, confused and discouraged. However, I left his office feeling enthusiastic and eager to get down to business. My situation was very unique, I needed his expertise for an array of things and Steve was able to address all of my needs. With a limited timeframe and an extreme amount of obstacles to overcome he worked meticulously, diligently and accomplished extraordinary results. His professionalism is incomparable and I am forever grateful.
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From their offices in Philadelphia, PA, the law firm of Steven J. Fromm & Associates, P.C. provides a full range of estate planning, probate and estate administration, tax, business and corporate legal services to clients throughout eastern Pennsylvania and the Delaware Valley, the Lehigh Valley Area, the Five-County Area, Bucks County, Delaware County, Montgomery County, Chester County, Philadelphia County, Berks County, Lehigh County, Lancaster County, York County, Harrisburg, Norristown, Doylestown, Media, West Chester, Allentown, Lancaster, and Reading.