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Tax-Free Reorganizations: The Evolution and Revolution of Triangular Mergers

33 Pages Posted: 26 May 2013 Last revised: 28 Aug 2014

Stephanie R. Hoffer

Ohio State University (OSU) - Michael E. Moritz College of Law

Dale A. Oesterle

Ohio State University (OSU) - Michael E. Moritz College of Law

Date Written: August 27, 2014

Abstract

Tax laws applicable to triangular mergers lack neutrality, are complex, and overlap substantially with other tax-preferred forms of corporate acquisition. Their current status is a result of both path dependency and Congress’s attempt to create consistency within a framework founded upon inconsistent conceptualizations of the corporation. This article highlights problems arising under current rules, including a notable lack of tax neutrality among merger forms. It proposes pragmatic revisions made within the constraint of double taxation of corporate profits and then revisits the question through a more normative framework. The paper concludes that the tax treatment of target shareholders and the target corporation in corporate acquisitions should be disaggregated. Finally, it observes that both pragmatic and normative solutions proposed within the reorganization statute are unsatisfying in light of larger structural problems in the Internal Revenue Code.

Keywords: reorganization, acquisition, non-recognition, tax-free, section 368, triangular merger, merger

JEL Classification: K00, K2, K20, K22, K29, K34

Suggested Citation

Hoffer, Stephanie R. and Oesterle, Dale A., Tax-Free Reorganizations: The Evolution and Revolution of Triangular Mergers (August 27, 2014). Northwestern University Law Review, 2013; Ohio State Public Law Working Paper No. 203. Available at SSRN: https://ssrn.com/abstract=2269838

Stephanie R. Hoffer (Contact Author)

Ohio State University (OSU) - Michael E. Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

Dale A. Oesterle

Ohio State University (OSU) - Michael E. Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

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