This article examines the origin and efficacy of the continuity of business enterprise requirement which must be met for a transaction to qualify as a reorganization under section 368 of the Internal Revenue Code. It argues that the requirement emerged from court decisions in the early years of the federal income tax holding that the reorganization provisions were intended by Congress to apply only to transactions involving a mere change in the form of the shareholders' investment. It questions the persuasiveness of these decisions, especially in light of legislative history indicating that Congress had another objective when it adopted the reorganization provisions. The article concludes that the continuity of business enterprise requirement hinders rather than advances this congressional objective, contributes to tax inefficiency in corporate reorganizations, and in many cases is easily circumvented by informed taxpayers. It is therefore suggested that the requirement be abolished or severely restricted.