Reuven S. Avi-Yonah, Repealing Reorgs, U. Mich. L & Econ. Rsch. Paper (Nov. 27, 2025):

Under the Supreme Court’s opinion in Moore, it is likely that realization is essential for defining income as a constitutional matter. Therefore, when a transaction involves realization, it should presumptively be taxable unless there are very good reason for nonrecognition of gain. Given this reality, there are good reasons for Congress to consider repealing tax-free reorganizations and the other nonrecognition rules of the corporate tax, primarily for non-tax reasons. Acquisitive A, B, and C reorganizations and acquisitive section 351 transactions typically are used for large public corporations to acquire startups, which encourages monopolies. Triangular mergers raise corporate governance concerns because they generally do not allow shareholders of the acquirer to vote on the merger. Divisive D reorganizations and section 355 spin-offs also raise corporate governance issues when combined with mergers, as well as undermining the classical system of corporate/shareholder taxation that Congress has preferred since 1935. E reorganizations encourage substituting debt for equity, raising bankruptcy risks. F reorganizations facilitate a race to the bottom and raise corporate governance concerns. G reorganizations facilitate bankruptcies which are already subsidized by other sections of the code.