The information presented is only of a general nature, intended simply as background material, is current only as of the latest revision date, October 15, 2007, omits many details and special rules and cannot be regarded as legal or tax advice.

Internal Revenue Code §§ 368(a)(1)(A) and 368(a)(2)(D)

(a)(2)(D) Reorganization Diagram

Post-Transaction Structure

These transactions must still qualify as A reorganizations, i.e., the merger must be a "statutory merger or consolidation" and the general reorganization requirements must be satisfied.

Instead of receiving Sub stock, as would be the case in a simple A reorganization, the Target shareholders can receive Acquiring stock as long as:

• Acquiring is in control of Sub.

• The Target shareholders receive no shares of Sub stock.

• The transaction would qualify as an A reorganization had Target merged directly into Acquiring.

• Sub acquires substantially all the assets of Target.

There is again no requirement that voting stock be used, the minimum amount of Acquiring stock is governed by continuity of interest concerns and the same rules regarding escrowed and contingent stock apply as in A reorganizations.

Sub can again transfer the former T assets acquired in the merger to a subsidiary controlled by Sub. In addition, Acquiring can transfer its Sub stock to a subsidiary controlled by Acquiring.

© 2007