Spin-offs, Split-offs, and Split-ups (U.S. Corporate Tax)

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This video shows the format of 3 different types of corporate reorganizations: spin-offs, split-offs, and split-ups. In a spin-off, the distributing corporation transfers assets to a subsidiary, and the shareholders of the distributing corporation receive stock in the subsidiary. In a split-off, the distributing corporation transfers assets to a subsidiary, and the shareholders of the distributing corporate exchange some of their shares in the distributing corporation for shares in the subsidiary. In a split-up, the distributing corporation transfers assets to two different subsidiaries, and the shareholders of the distributing corporation receive stock in the subsidiaries (afterwards, the distributing corporation ceases to exist).

Spin-offs, split-offs, and split-ups may be taxable or nontaxable. If taxable, a spin-off is treated as a dividend, a split-off is treated as a redemption, and a split-up is treated as a liquidation. For a spin-off, split-off, or split-up to qualify as a tax-free reorganization (e.g., a Type D divisive reorganization), the requirements listed under Section 355 and Section 368 of the U.S. tax code must be met.

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4 thoughts on “Spin-offs, Split-offs, and Split-ups (U.S. Corporate Tax)

  1. So is the split-up like was happened to Standard Oil, with how Rockefeller still owned stock in all the companies it was turned into.

  2. If ECI shareholders receive FSC shares as special dividends (stock dividends), how is any of FSC, ECI or its shareholders taxed in the first place?

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