A finished ACC-669 Topic 8 reorganization structure memo example, recommending a forward triangular merger that defers $5,000,000 of a founder's gain, defended against continuity of interest, section 382 and two taxable alternatives. Searches like "acc 669 topic 8 assignment example", "acc669 topic 8 sample" and "acc-669 topic 8 example" land here.
What a finished ACC-669 Topic 8 reorganization structure memo looks like
The finished memo fixes illustrative facts once: a target worth $10,000,000, the founder's $1,000,000 stock basis, $4,000,000 of inside asset basis and a $1,500,000 loss carryforward. A taxable asset purchase triggers $6,000,000 of corporate gain; the whole carryforward is usable against a gain that size, leaving $945,000 of tax at 21 percent before the founder is taxed on $8,055,000 in liquidation. A stock purchase for cash taxes him on $9,000,000 and gives the buyer no step-up. In the recommended merger he receives $6,000,000 of acquirer voting stock and $4,000,000 of cash. Section 356 caps his recognized gain at the $4,000,000 of boot, section 358 leaves $1,000,000 of basis in his new shares, and $5,000,000 of gain waits there. The target's $4,000,000 asset basis carries over under section 362(b).
How an ACC-669 Topic 8 example is structured
The memo leads with its recommendation and then earns it against each alternative in turn. A facts block states values and bases once, each labeled illustrative. Three short panels price the asset purchase, the stock purchase and the merger, each showing corporate tax, the founder's recognized gain and the buyer's basis in the target's assets. The qualification section follows: a statutory merger, continuity of interest with 60 percent of the consideration in acquirer stock, continuity of business enterprise and a business purpose. A paragraph explains why the deal runs through a subsidiary under section 368(a)(2)(D) rather than as a reverse triangular merger, which the cash portion would disqualify. The boot is characterized by the Clark approach, a hypothetical redemption of acquirer shares. A limits section answers section 382 and the step transaction doctrine, and the final paragraph says what change in the facts would flip the recommendation.
Three structures priced on one set of facts
Asset purchase, stock purchase and merger each show corporate tax, the founder's recognized gain and the buyer's asset basis, so the comparison rests on figures rather than labels.
Continuity of interest measured, not assumed
Acquirer stock makes up 60 percent of the consideration, comfortably above the stock proportion the continuity regulations' own example treats as enough, and no redemption of it is planned.
Why the reverse triangular form was rejected
Section 368(a)(2)(E) requires control of the target to be acquired for voting stock, and 40 percent cash leaves too little stock for that, so the forward form is used.
Boot tested as a hypothetical redemption
Following Clark, the $4,000,000 is tested as a redemption of acquirer shares; against a $90,000,000 acquirer his stake falls from 10 to 6.25 percent, so it is capital gain.
The loss carryforward limited, not lost
Moving from full ownership to 6 percent is an ownership change, so section 382 caps yearly use of the $1,500,000 at target value times the long-term tax-exempt rate.
What would reverse the recommendation
A buyer valuing the $6,000,000 step-up above the $945,000 of immediate corporate tax it costs, or a founder needing all cash, would reopen the choice.
Where marks go in ACC-669 Topic 8
A merger recommended because it is tax-free, with no test of whether it qualifies, is the weakest paper this topic produces. Continuity of interest asserted without the stock proportion leaves the central requirement unexamined, and a reverse triangular form chosen alongside 40 percent cash fails a condition the writer could have checked. Papers that call the $4,000,000 of boot a dividend, or capital gain, without the hypothetical redemption Clark applies reach a character by assumption, and skip the earnings and profits limit a dividend result would bring in. Carrying the $1,500,000 loss forward with no section 382 limit overstates what the buyer acquires. Taxable alternatives dismissed without figures give the reader no reason to reject them. Memos silent on what would overturn the recommendation present a conditional answer as a settled one.
Get an ACC-669 Topic 8 example written to your instructions
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ACC-669 Topic 8 questions, answered
What is continuity of interest?
A requirement, developed by the courts and now set out in the section 368 regulations, that the target's shareholders keep a substantial proprietary stake in the combined business through acquirer stock. If most of the consideration is cash, the transaction looks like a sale and does not qualify. The regulations' examples indicate a stock proportion that suffices, and the memo stays well above it rather than near the line.
Why use a subsidiary instead of merging the target into the acquirer?
A forward triangular merger under section 368(a)(2)(D) keeps the target's business and liabilities in a separate corporation, which acquirers usually prefer, while the founder still receives acquirer stock. Because the acquirer owns all of that subsidiary, the two form an affiliated group and can file a consolidated return under section 1501, although the consolidated return regulations have their own rules for losses a new member brings in.
What does the step transaction doctrine threaten here?
It lets the IRS and the courts treat formally separate steps as one transaction when they are parts of a single plan. If the acquirer had agreed to redeem the founder's new shares soon after closing, the stock he received would count as cash for continuity purposes and the merger could fail to qualify. The memo states that no such arrangement exists and names that fact as one its conclusion depends on.