Citations: Rev. Rul. 72-576; 1972-2 C.B. 217
Rev. Rul. 72-576
Advice has been requested as to the Federal income tax consequences of a statutory merger effected under the provisions of sections 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1954 under the circumstances described below.
Corporation Y, a wholly owned subsidiary of Corporation X, acquired, pursuant to a statutory merger, the assets of Corporation W, an unrelated corporation, in exchange for stock of X, and the assumption by Y of the liabilities of W. The merger, in and of itself, otherwise qualified as a reorganization described in sections 368(a)(1)(A) and (a)(2)(D) of the Code.
Immediately following the merger of W into Y, and as part of the same plan of reorganization, Y transferred the newly acquired assets of W to its wholly owned subsidiary, Corporation Z.
Section 368(a)(1)(A) of the Code provides that the term reorganization means a statutory merger.
Section 368(a)(2)(D) of the Code provides, in part, that a statutory merger where substantially all of the properties of a corporation are acquired in exchange for stock of a corporation which is in control of the acquiring corporation will not be disqualified under section 368(a)(1)(A) of the Code.
Section 368(a)(2)(C) of the Code states, in part, that a transaction otherwise qualifying under section 368(a)(1)(A) of the Code will not be disqualified by the transfer of assets, which were acquired in the transaction, to a corporation controlled by the corporation that acquired the assets.
The Code places no restriction on the application of section 368(a)(2)(C) of the Code to a reorganization that otherwise qualifies as a reorganization under sections 368(a)(1)(A) and (a)(2)(D) of the Code. Accordingly, the acquisition by Y of the assets of W in exchange for the stock of X and the assumption by Y of the liabilities of W will not be disqualified as a reorganization described in sections 368(a)(1)(A) and (a)(2)(D) by reason of the subsequent transfer by Y of the assets of W to Z.
