Spin-Off

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Spin-Off

The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders.

When a spin-off occurs, the shareholders of the parent corporation are not required to surrender any of their parent corporation stock in exchange for the subsidiary's stock.

In the event that the distribution of stock to the parent corporation's shareholders amounts to a dividend, the distribution can be taxed pursuant to provisions of Income Tax statutes.

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indices effective for spin-offs whose ex- distribution date is on or after October 1, 2015.
We compare these "sponsored" spin-offs to "conventional" spin-offs in terms of long-run stock performances, return on assets (ROA), growth opportunities, capital expenditures, and earnings per share (EPS).
Previously, such so-called comfort rulings were available to resolve questions such as (i) whether a spin-off has an adequate corporate business purpose, (ii) whether a spin-off will be regarded as used principally as a device for the distribution of earnings and profits, and (iii) whether a spin-off and any prior or subsequent acquisition of stock in the Parent or the Spinco are part of a plan under section 355(e).
2002-49, another important ruling on the active trade or business requirement of a spin-off.
Notwithstanding the compelling corporate business objectives of Fortune Brands' spin-off of Gallaher, the transaction probably would not have been undertaken had the proposed regulation been finalized before the deal was concluded.
The formation of the new subsidiary provides a vehicle to consummate a transaction, spin-off an asset to our shareholders and/or to facilitate the financing of such a transaction".
1) A number of related provisions and conforming amendments were adopted at the same time, the cumulative effect of which is to revise substantially the conditions for obtaining a tax-free separation -- whether as a spin-off, split-off, or split-up(2) -- of one corporation from another pursuant to section 355.
For example, in a spin-off, the original option no longer has the economic value it had prior to the restructuring, because the entities have been separated and the sum of the separate economic parts may not equal the original economic whole.
Usually, the amount of tax at risk, the size and complexity of the transaction, and the presence of public shareholders require obtaining an advance ruling from the Internal Revenue Service when the taxDaver is planning a spin-off.
Sponsored by Price Waterhouse and IBC, an international conferencing corporation, the two day program will bring together many of the country's most experienced corporate executives in spin-offs, who will discuss strategic advantages of and vehicles for spinning off corporate assets.
Cendant expects that the refinancing of these debt securities and any other debt at the time of the spin-offs will be allocated among the new Real Estate Services, Hospitality, and TDS companies, generally based upon the expected ability of each new company to service its debt load.