Reexamining Triangular B Reorganization: Requirements and Potential Tax Traps or a Time To Revisit its Favorable Application

Abstract

One of the most commonly executed changes in the structure of U.S. corporations is an exchange of stock of one corporation with stock of another corporation, a transaction that is often designed and implemented pursuant to Code Section 368(a)(1)(B) and also a special variant it known as “triangular B reorganization.”

The literature on B reorganizations or triangular B reorganizations has focused on analyzing technical aspects in achieving the favorable treatment whereas this paper not only focuses on several U.S. federal income tax aspects that arise upon execution of triangular B reorganizations but would also demonstrates that over the years the Service and the Courts understood the need to limit the favorable tax treatment in a wide variety of triangular B reorganizations and also suggest that the time has come for Congress to reexamine the application of triangular B reorganization in the cross-border context.

Keywords: Reorganization, Corporate Tax, Tax Policy, International Tax, Tax

JEL Classification: K00, K1, K34