Introduction to Corporate Cross-Border Transfers, Reorganizations, and Inversions Part 2. “Taxation of Mergers and Acquisitions in Which a Foreign Corporation Acquires a U.S. Corporation”

Introduction to Corporate Cross-Border Transfers, Reorganizations, and Inversions Part 2. “Taxation of Mergers and Acquisitions in Which a Foreign Corporation Acquires a U.S. Corporation”

Tax Law
By Anthony Diosdi IntroductionIf a U.S. corporation is liquidated and its assets are distributed to foreign shareholders, U.S. federal income tax will be imposed on the gain realized by the distributing corporation except to the extent that a tax-free-exchange provision provides otherwise. If the stock or assets of a U.S. corporation are acquired by a foreign corporation in exchange for stock of the foreign corporation, gain realized by U.S. shareholders and the U.S. corporation will also be subject to tax, except to the extent that the gain is sheltered by a tax-free-exchange provision provided by the Internal Revenue Code. Under the Internal Revenue Code, taxable gains typically realized in exchange of property in connection with a variety of transactions involving only U.S. corporations will result in a tax-free-exchange. However, when…
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