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Douglas S. Stransky, partner and leader of the Tax Practice Group, has published the third post in his series for the LexisNexis blog, examining what happens when the most common structuring sequence in S corporation M&A runs into a target’s own election history.

The post follows a hypothetical sale of a U.S. manufacturer to a foreign strategic buyer, where a pre-closing F reorganization under Rev. Rul. 2008-18 is the standard answer: the S election survives, and the operating company keeps the employer identification number that its payroll, licenses, and registrations all depend on. The complication is the 60-month limitation on entity classification elections, which can block the final step for a target that became an S corporation by election within the past five years. The fix is a merger into a newly formed LLC, and the post walks through what that fix costs, beginning with a new EIN.

The post draws on themes from his LexisNexis treatise, International M&A and Joint Ventures: Key U.S. Taxation Issues, including its tax due diligence checklist and case studies.

Read the full post »