An investigation of proposed changes in the federal income taxation of acquisitive reorganizations.

摘要

This Study investigated four major changes proposed in the still unenacted Subchapter C Revision Act of 1985 for the federal income taxation of tax-free acquisitive reorganizations as defined in the Internal Revenue Codes of 1954 and 1986. Advocates of the Act assert that the proposed changes will simplify and rationalize the federal income tax law. Opponents of the Act argue that: (1) the proposed changes deviate significantly from long-standing notions of realization and recognition of gain and loss in the context of tax-free acquisitive reorganizations; (2) the repeal of the General Utilities doctrine in the Tax Reform Act of 1986 addressed the most significant abuses and lack of symmetry between gain recognition by a target corporation and tax basis of assets in the hands of an acquiring corporation; (3) enactment of the Subchapter C Revision Act of 1985 will cause a major loss of tax revenue to the federal government; and (4) the explicitly elective taxing regime will neither simplify nor rationalize the federal income tax laws. Although the major changes proposed for tax-free acquisitive reorganizations make a great deal of sense from a tax policy perspective, this Study concluded that the Subchapter C Revision Act now has a very small chance of being enacted by Congress. The virtual certainty that the changes would cause the loss of large amounts of revenue assures their nonenactment in today's deficit-driven policy-making environment.