Corporate Entity Conversions: Allocating E&P and Tax Attribute Carryovers in Reorganizations and Acquisitions

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, May 23, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide corporate tax professionals and advisers with a practical guide to mastering the calculation of earnings and profits (E&P) and other tax attributes in the context of entity conversions, mergers and reorganizations. The panel will identify transactions and structures where E&P and attribute carry-forwards will have a material impact on the tax treatment of distributions and will discuss integrating acquired entity E&P tiers into the parent company’s calculations.

Description

For tax advisers to corporations undergoing consolidations, mergers or entity reorganizations, a significant and often unanticipated challenge is properly calculating, reconciling and allocating existing E&P and other tax attributes, including loss carry-forwards. The carry-forward of these tax attributes often impact the tax treatment of distributions to shareholders.

The rules governing allocation of accumulated E&P in a reorganization depend on the nature of the event or transaction. For companies making conversions of existing divisions in a reorg to simplify their entity structure, any accumulated E&P would “tier” into the parent structure.

In the case of an acquisition, however, the existing E&P of the acquired entity will remain with the acquired entity unless the parent corporation elects a “change in group structure” under the consolidation rules. The taxability of any distribution will be impacted by the allocation of the E&P after the conversion transaction or event.

Generally, most taxpayers don’t keep a running total of accumulated E&P and may not calculate it at all until it needs to determine whether a distribution qualifies as a dividend, tax-free return of basis, or gain from an asset sale or exchange. However, corporate tax advisers need to know the rules for allocating E&P in companies that have undergone reorganizations to avoid costly tax consequences arising from mischaracterized distributions.

Listen as our experienced panel provides a thorough and practical guide to calculating E&P for consolidated, merged or reorganized companies, and offers useful tax strategies for allocating distributions from E&P pools.

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Outline

  1. Calculating E&P in an entity simplification transaction
  2. Carryovers and limitations of tax attributes in merger and reorganization transactions
    1. IRC 381 carryover rules
    2. Section 382 limitations
    3. Section 355 rules governing tax treatment to corporation and shareholders on distributions from consolidated entity
  3. Transactions where acquiree E&P tiers up to parent
  4. Change in group structure and impact on allocation of E&P between parent and subsidiary
  5. Case study and illustrations

Benefits

The panel will discuss these and other important questions:

  • How Section 381 carryover rules impact E&P allocations between acquirer and target corporations
  • Section 312 default rules for distributions from corporations involved in acquisition and separations
  • Determining taxability of distributions from the E&P pool of an acquired entity vs. distributions from parent
  • Workpaper methodology for calculating E&P and maintaining schedules

Faculty

Marcus E. Dyer, CPA, Esq.
Marcus E. Dyer, CPA, Esq.
Tax Manager
WithumSmith+Brown

Mr. Dyer manages and reviews all aspects of federal and state tax compliance for C-corporation, S corporation and...  |  Read More

Paul Helderman, CPA, MST
Paul Helderman, CPA, MST

Partner
WithumSmith+Brown

Mr. Helderman's primary focus is on federal corporate income tax issues, including advising on income tax...  |  Read More

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