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Tag Archive for Corporate Restructuring

Divisive Foreign Corporate Reorganizations

Introduction

Corporate reorganizations are valued tools to the practitioner. They provide the opportunity to defer taxable events by virtue of non-recognition treatment. They are characterized as acquisitive, reformative, and divisive transactions. Currently they are relevant as timely transactions as publicly traded security prices have soared while revenue growth has slowed. Companies can grow by shrinking, selling off under performing assets and putting the cash to work. (See Jack Hough, Buy the Asset Sellers, Barron’s Magazine, Saturday, December 7, 2013)

In a previous writing (Tax Connections/Foreign Corporate Acquisitive Reorganizations) the Read more

Corporate Restructuring

TaxConnections Blogger Larry Stolberg posts about corporate restructuringExpansion, growth and new objectives may require some form of corporate reorganization. Often owner managers wish to add family members or key employees as shareholders. In order to avoid adverse income tax implications, the issuance of shares has to be implemented properly.

Family Members

First freezing the value of the present shareholders interest before issuing shares to family members is recommended to avoid the conferral of benefits to the present shareholder(s). Family shareholders may hold voting or non-voting, participating or non-participating shares. The opportunity to income-split dividend income to lower income bracket individuals as opposed to the higher income tax bracket shareholder may result in years of benefits, especially if the dividends will be used to fund post-secondary education and other expenditures.

Family Trusts

Generally a family trust will own non-voting common shares while the parent continues to hold voting shares. A properly structured family trust will provide the trustees with the discretion to pay dividends or capital from the trust to beneficiaries of the trust, thereby accomplishing an efficient income splitting strategy for family members. A T3 tax return for a family trust is due for filing on March 31st because the year end is always the calendar year. Read more