Discussion:2 s corps merge
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Discussion Forum Index --> Tax Questions --> 2 s corps merge
| 3 October 2009 | |
| I have 2 s corps that are going to merge into one. let us say s copr A merges into S corp B So for A does it have to be disolved using form 966? the assets of A will be merged into B and the stockholders of B will be a combination of those that owned A and B
How does all this work for A from a tax stand point Neil | |
| October 3, 2009 | |
| If it's a true merger, and the consideration is all stock, it will likely (but not necessarily) qualify to be tax-free as a section 368(a)(1)(A) reorganization. The two corporations and each "significant stockholder" (holder of 1% or more, in the case of private companies) must file statements under reg. sec. 1.368-3. Neither party is liquidated and there is no need to file Form 966.
If the transaction is something else, the outcome and reporting will be different. You would file Form 966 if there is an actual liquidation of a corporation, including in a C reorganization (an exchange of stock of B for the stock of A, followed by a liquidation of A, which can also be tax-free). | |
| 3 October 2009 | |
| assuming that A acquires the stock of B and it is a reorganization, what tax forms need to be filed for B and A
Neil | |
| October 4, 2009 | |
| If A acquires the stock of B, and then A dissolves? I'm not trying to be difficult here, but there are only 2 letters to keep track of.
Has the transaction structure been decided? If so, please explain exactly what it is: who is exchanging what for what, who is merging or dissolving, etc. If there is flexibility about it, you probably want to do a simple merger and you want it to be an A reorganization; in that case, as far as federal income tax is concerned, you're going to have statements under reg. sec. 1.368-3(a) filed by the corporations with their returns, statements under reg. sec. 1.368-3(b) filed by the significant stockholders with their returns, the return for the non-surviving corporation marked final, and I'm sure someone can speak up if I'm leaving anything else out. If one corporation needs to acquire the stock of the other and survive, you're either going to have a termination of the target's S election or an election to become a QSSS. | |
| 4 October 2009 | |
| A is an S corp and B is an S corp. B is merging into A and new stock will be issued to give the share holders of B stock in a and B will exist as a dba of A not aQSS. So from this example, does B have to be dissolved and a 8806 filed with its final return?
Neil | |
| October 4, 2009 | |
| B would not be dissolved if it merged into A.
See the instructions to Form 8806: even apart from the $100 million thresholds, it only applies to a transaction subject to sec. 367(a), that is, generally, an "outbound" transaction in which assets are moving from a domestic corporation to a foreign corporation. If these are S corporations, they can't be foreign. | |
| 4 October 2009 | |
| B's legal existence must terminate. Presumably, B would be treated as the disappearing corporation in the merger documents.
I see no reason to file Forms 8806 or 966. | |
| 4 October 2009 | |
| so wht I think I am reading is the B will dissolve under state law, file a final Federal return all the assets of B flow into A and A issues new stock to the new stock holders and file a letter of explanation for the reorganization wit the 1120s. Since this occured as of 10/1, then B files its final 1120s by 3/15/2010 and A files its 1120S also as of 3/15/2010
Is there anything I am missing Neil | |
| October 4, 2009 | |
| B does NOT dissolve. Merging is different from dissolving.
Nothing happened as of 10/1 if it's 10/4 and you're still deciding what to do. | |
RoyDaleOne (talk|edits) said: | 4 October 2009 |
| http://www.andrewmitchel.com/html/topic_page_1.html | |
| 4 October 2009 | |
| if B does nto dissolve it seems it is sitting in limbo with the state of Ohio since it filed a final tax return
Neil | |
| October 4, 2009 | |
| The corporation ceases to exist upon the effectiveness of the merger. | |
| 4 October 2009 | |
| so if it ceases to exist I assume that means I have to dissolve it with the state???? | |
| 5 October 2009 | |
| Neil, the merger documents must be filed with the state to make the merger effective. That's what makes the disappearing corporation cease to exist under state law. If you go to the Ohio Secretary of State's web site, you will find the forms and the fees required to effect a merger. This is a job for an attorney, not a CPA; however, the client may be able to do it him/herself with the guidance provided on the SOS web site. See [1] | |
| 5 October 2009 | |
| Thank you Katie. That is the guidance I was looking for. Then I only have to file an 1120S and mark it a final return??? is that correct | |
| 5 October 2009 | |
| You need to attach the statements required by the Sec. 368 regulations to the returns of both corporations. Read the regs to which LH referred you above. | |
