After tax-deferred spin-off expansions in 2017 and 2023, Japan is considering additional deferral rules for sales of ancillary businesses, provided the proceeds are reinvested in core activities.
The changes are modeled—at least ostensibly—on similar tax reforms in Germany in early 2000s that were intended to unwind the postwar Deutschland AG model. And they’re structural cousins to the former rollover rule for home sales under § 1034, which perhaps promoted liquidity in the housing market. The big questions: should corporate nonrecognition rules be bounded temporally or based on business conditions, or should reinvestment itself should be enough to defer tax?
Coverage from Reuters, below the fold.
Makiko Yamazaki & Miho Uranaka, Japan Eyes Tax Breaks for Non-Core Business Sales in Governance Reform Push, Reuters (Aug. 24, 2026) (reprinted at Yahoo Finance):
The plan would remove a major obstacle to companies shedding non-core businesses and redeploying capital into growth areas, in what could become one of Prime Minister Sanae Takaichi’s most significant initiatives to advance corporate governance reform.
Under the plan, roughly 30% corporate tax on gains from sales of non-core businesses would be deferred indefinitely, provided companies reinvest the proceeds within several years in acquisitions aligned with their core operations and commit to investing in those businesses . . . .
Previous TaxProf Blog coverage:
- IRS Brings Back Targeted Rulings for Spin-Offs and Reorganizations (May 16, 2026)
- McCormick-Unilever and the Next Wave of Reverse Morris Trust Deals (Apr. 11, 2026)
- Jafry Presents “Death and Taxes: Does the Lock-In Effect Fade When Capital Gains Must Be Taxed at Death?” Today at Toronto (Mar. 5, 2026)
- Avi-Yonah: Repealing Reorgs (Dec. 13, 2025)
- SSRN Review & Roundup: Saito Reviews Walker’s The Durability of Tax Laws and Their Objectives (Nov. 7, 2025)
- Borden: The Section 1031 Qualified-Use Requirement (July 11, 2024)
