Overview and Fundamentals of Section 368. Section 368(A)(1) outlines a format for US tax treatment of corporate reorganizations, as described in the Internal Revenue Code of 1986. … To qualify as a tax-free reorganization, a transaction must meet the statutory requirements for one of the types of tax-free reorganizations …

What is a reorganization tax?

The main use and advantage of a tax-free reorganization is to acquire or dispose of the assets of a business without generating the income tax consequences that would result in a straight sale or purchase of those assets.

What are the requirements for a corporation to qualify as a tax-free reorganization?

To qualify as a tax-free reorganization, stock of the buyer (or buyer’s affiliate) generally must be used as a significant portion of the consideration (varying from about 40% to 100% of the consideration, depending on the type of tax-free reorganization) and, in certain tax-free reorganizations, the stock must be …