Home      Login

Acquiring the Equity of an Entity Taxed as an S Corporation? Consider an “F Reorg”  

Author:  Salvatore J. Totino.

Source: Volume 40, Number 02, Winter 2023 , pp.57-60(4)

Journal of Taxation of Investments

< previous article |next article > |return to table of contents


Although would-be buyers in middle market M&A transactions continue to face challenges in what generally remains a seller’s market, there are sometimes opportunities to take advantage of an often-overlooked planning method that can offer tax and non-tax benefits for both buyers and sellers. A significant number of target companies in the middle market are organized as S corporations, and a buyer’s strategic use of an “F reorganization” in an M&A transaction involving an S corporation can generate substantial tax benefits for the buyer and, in some cases, more flexibility for the seller. Despite a decidedly non-glamorous name, the “F reorganization” can be a powerful tool in a buyer’s M&A toolkit that should not be ignored.

Keywords: F reorganization, S corporation, step-up, tax shield, IRC Sec. 368(a)(1)(F), IRC Sec. 338(h)(10)

Affiliations:  1: Calfee, Halter & Griswold LLP.

Subscribers click here to open full text in PDF.
Non-subscribers click here to purchase this article. $17

< previous article |next article > |return to table of contents