An F reorganization is “a mere change in identity, form, or place of incorporation of one corporation, however effected.” § 368(a)(1)(F). This is the simplest form of reorganization – for example, changing your state of incorporation or changing your name.
But the regulations impose strict requirements. Reg. § 1.368‑2(m)(1) requires:
- All stock of the resulting corporation is distributed in exchange for stock of the transferor.
- The same persons own the stock of both corporations in identical proportions.
- The resulting corporation has no tax attributes before the reorganization.
- The transferor completely liquidates for tax purposes (though it may retain de minimis assets to preserve its legal existence).
- No other corporation holds the transferor’s properties and succeeds to its tax attributes.
- The resulting corporation holds no property acquired from any corporation other than the transferor.
Why would you want an F reorganization? Because unlike other reorganizations, the corporation’s tax year does not end on the date of the transfer, and the acquiring corporation can carry back NOLs. § 381(b). (Though NOL carrybacks are now very limited after the TCJA.)
The Commissioner has used F reorganizations to attack liquidation‑reincorporation transactions. If a corporation liquidates and shareholders immediately reincorporate with the same assets and ownership, the IRS may treat the entire transaction as an F reorganization – meaning no recognition of loss on the liquidation and carryover of tax attributes.
If a transaction qualifies as both an F reorganization and another type, the F reorganization rules take precedence. Reg. § 1.368‑2(m)(3)(iii)(B). So if you’re planning a simple change of name or domicile, structure it as an F reorganization – it’s the cleanest, most tax‑free way to do it.
This article is for general informational purposes only and is subject to change. Tax laws are complex and vary by situation. You should consult a qualified professional for advice specific to your circumstances. For questions, contact Alan Goldstein.
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