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


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.

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

Learning Objectives

After completing this course, you will be able to:

  • Identify corporate reorganization transactions and events that require separate calculations of acquired entity’s E&P
  • Recognize the tax treatment of distributions from E&P from acquired or reorganized corporations
  • Determine how the tax attribute carryover and limitation rules of Sections 381 and 382 impact the tax treatment of distributions from the E&P pool of acquired entities
  • Determine a strategy for allocating E&P among consolidated companies in a reorganization or merger transaction

Faculty

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

Mr. Dyer manages and reviews all aspects of federal and state tax compliance for C-corporation, S corporation and partnership returns, including consolidated C-corporation returns. He advises businesses on a wide array of tax matters including but not limited to reorganizations and employee benefits. He manages and reviews all aspects of the preparation of high net worth individual returns and conducts tax research on federal and state tax issues. He also handles tax controversies, including at the examination, appeals and collections stages.

Paul Helderman, CPA, MST, Partner
WithumSmith+Brown, Morristown, N.J.

Mr. Helderman's primary focus is on federal corporate income tax issues, including advising on income tax accrual matters, tax department internal controls, tax compliance, taxing authority audits and tax planning. With more than 30 years of tax consulting experience, he has worked with numerous Fortune 50, 500 and 1,000 corporations, advising on federal corporate income tax matters. He works with clients across various industries, including consumer goods, industrial products, biotechnology and pharmaceutical. Prior to joining his Firm, he worked with the Federal tax practice of PwC, where he served as Tax Director. He was routinely consulted in connection with the audit of the income tax accrual included in the financial statements of numerous notable SEC registrants, some of which included the income tax accounting impacts of multibillion dollar acquisitions and dispositions.


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David Adler

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Deloitte Tax

Silvia Aguirre

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Avalara

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Grant Thornton

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ADP Tax Credit Services

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Williams Mullen

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Garippa Lotz & Giannuario

Joseph Geiger, Esq., CPA

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Vertex

Kenneth Graeber

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Marvin F. Poer & Co.

Don Griswold

Executive Tax Counsel

Berkshire Hathaway Tax Group

George Manousos

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PricewaterhouseCoopers

Diane Matulich

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Advanced Micro Devices

Betty McIntosh

Senior Managing Director

Cushman & Wakefield

Foy Mitchell

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Marvin F. Poer & Co.

Walter Pickhardt

Partner

Faegre Baker Daniels

Richard Pomp

Professor of Tax Law

University of Connecticut

Richard J. Prem

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Amazon.com

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Scout Economics

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taxadvantagegroup

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