Series 79: 11.2.3.3. Tax-Free Reorganizations

11.2.3.3. Tax-Free Reorganizations

Depending on how it is structured, a merger or acquisition can be a taxable event or can be treated in whole or in part as a tax-free reorganization. In most cases, the buyer’s shareholders will prefer the latter outcome. It is important to note that even a tax-free reorganization is not tax-exempt; taxes are simply deferred until a later taxable event occurs, such as when a shareholder sells shares of the buyer that the shareholder received as payment for the acquisition.

For an M&A transaction to qualify as a tax-free reorganization, the buyer must continu