Tax Aspects of Corporate Division

CHAPTER 7

The Acquisition of Control of a Corporation Conducting a Business

Introduction

Chapter 5 discussed the 5-year trade or business requirement, and Chapter 6 focused on the continuity of interest requirement. The 5-year requirement was discussed in the context of a corporation that creates a trade or business that is eventually transferred to a subsidiary, and the stock in the subsidiary is distributed to the parent corporation’s shareholders. The following materials are directed at situations where a 5-year holding period requirement is imposed on the corporate shareholder receiving the controlling interest as a distribution. In a sense, this extension of the stock ownership period requirement to the shareholder is another continuity ...