Extract to table

To qualify under Section 368(a)(2)(E), the following specific statutory requirements must be met: (i) The target must survive the merger and hold "substantially all" of its properties and the properties of the merging subsidiary after the transaction; (ii) Former stockholders of the target must exchange, in the aggregate, an amount of target stock constituting "control" of the target (within the meaning of Section 368(c), i

the parent of the merging subsidiary); and (iii) The general requirements of COI and COBE must be satisfied

368-1(e), the IRS has historically taken the position — and the Service's ruling guidelines confirm — that at least 40% of the total consideration (measured by value) must consist of equity of the issuing corporation (or its parent) for the COI requirement to be satisfied

338(h)(10)-1(c)(2) — that is, the target must be a subsidiary member of an affiliated group of corporations filing a consolidated federal income tax return under Section 1501, and the common parent of that group must join in the election; or (ii) The target is an S corporation, and all of the S corporation's shareholders join in the election

However, this transaction would trigger entity-level gain recognition at VeloPay and must be carefully modeled to determine whether the tax cost is justified

The Rollover Agreement must be carefully structured to ensure that the rollover is not treated as receipt of equity in the merger itself