Rev. Rul. 57-276

Rev. Rul. 57-276

Advice has been requested regarding the requirements for filing Federal income tax returns in cases involving corporate reorganizations which qualify under section 368(a)(1)(F) of the Internal Revenue Code of 1954, and which also qualify as reorganizations under subparagraph (A), (C), or (D) of section 368(a)(1) of the Code.

The instant situations involve two existing corporations which reincorporated under the laws of a state other than that of original incorporation. Each corporation organized a new corporation in the other state, and each corporation then merged into its newly organized corporation under applicable merger statutes of the states concerned. The first of the existing corporations was a single corporation with no subsidiaries. The second of the existing corporations was the parent corporation of an affiliated group of corporations which had filed consolidated income tax returns. Each merger qualified as a reorganization under both section 368(a)(1)(A) and section 368(a)(1)(F) of the Code.

Section 381(b) of the Code, relating to carryovers in certain corporate acquisitions, provides, in part, as follows:

(b) OPERATING RULES.- Except in the case of an acquisition in connection with a reorganization described in subparagraph (F) of section 368(a)(1) -(Italics supplied.)

(1) The taxable year of the distributor or transferor corporation shall end on the date of distribution or transfer.

Section 368(a)(1)(F) of the Code provides that the term `reorganization' means:

(F) a mere change in identity, form or place of organization, however effected.

Section 1.1502-11(c) of the Income Tax Regulations provides as follows:

(c) When affiliated group remains in existence .-For the purpose of the regulations under section 1502, an affiliated group shall be considered as remaining in existence if the common parent corporation remains as a common parent and at least one subsidiary remains affiliated with it, whether or not such subsidiary was a member of the group at the time the group was formed and whether or not one or more corporations have become subsidiaries or have ceased to be subsidiaries at any time after the group was formed.

Prior to the enactment of section 381 of the 1954 Code, which has no counterpart in the Internal Revenue Code of 1939, the treatment of carryovers in taxable years was determined by various court decisions and administrative rules. Often a reorganization under section 368(a)(1)(F) of the Code will meet the requirements of subparagraphs (A), (C), or (D) of section 368(a)(1). It is believed that it was not the intention of Congress in enacting section 368(a)(1) of the Code to hold that just because a reorganization meets some other provision of section 368(a)(1) the provisions of subparagraph (F) of that section are not complied with even though the transaction also qualifies under subparagraph (F). Taking a contrary view under the 1954 Code would, for all practical purposes, defeat the provisions of section 381(b) of the Code, since many section 368(a)(1)(F) reorganizations meet some other provisions of section 368(a)(1).

Accordingly, it is held that where a corporate reorganization comes within the provisions of section 368(a)(1)(F) of the Code, pursuant to the provisions of section 381(b) of the Code, that part of the taxable year before the reorganization and that part of the taxable year after the reorganization constitute a single taxable year of the acquiring corporation, notwithstanding the fact that such reorganization also qualifies under another provision of section 368(a)(1) of the Code. An income tax return for the full taxable year is required to be filed by the acquiring corporation. The transferor corporation is not required to file an income tax return for any portion of such year. In the case of an affiliated group of corporations, if the transferor corporation was the parent corporation of an affiliated group which filed consolidated income tax returns, the same affiliated group with the acquiring corporation as parent remains in existence for the purpose of filing a consolidated return for the taxable year in which the reorganization occurred.