TAX-FREE MERGERS became a little easier under regulations the IRS issued at the end of August
Tax-free mergers became a little easier under regulations the IRS issued at the end of August.
In the past, when one corporation wanted to acquire another company but structure the deal as a “tax-free reorganization,” the shareholders in the target company had to remain in place after the deal. They were given shares in the acquiring corporation in exchange for their existing shares. The IRS has now made it easier for shareholders of the target who want to cash out before the deal. Starting in September, the target can redeem, or repurchase, shares from any shareholders who want out before the acquisition, as long as the target can show the acquiring company did not supply the cash to buy out these shareholders.