Jasper L. Cummings, Jr. (Alston & Bird, Atlanta) has published No-Net-Value and Type D Reorganizations, 107 Tax Notes 249 (2005), also available on the Tax Analysts web site as Doc 2005-6285, 2005 TNT 69-34. Here is the Introduction:
On March 9, 2005, the Treasury issued proposed regulations on so-called no-net-value transfers in what might be nonrecognition transfers to or by corporations, principally under §§ 332, 351, and 368. The proposal attempts to resolve three big issues in the little subchapter C world:
- Can an insolvent corporation reorganize? (Answer: no, except when the creditors become the shareholders.)
- How is Helvering v. Alabama Asphaltic Limestone Co., which says that sometimes a corporation’s creditors are its equity owners for reorganization purposes, applied? (Answer: sort of like Atlas Oil and Refining Corporation applied it.)
- Are we stuck with Spaulding Bakeries Inc. v. Commissioner and H.K. Porter Co., which say that § 332 does not apply if the parent does not receive a distribution on all classes of subsidiary stock it owns? (Answer: yes, but the liquidation may be a Type C reorganization instead of a taxable liquidation, which sort of defeats the purpose of upholding Spaulding Bakeries.)
