The IRS is considering whether an M&A transaction that targets a special purpose vehicle can be treated as tax-free, an official said.
One of the topics covered is COBE – continuity of the company in the SPAC context. COBE is a prerequisite for corporate restructuring to be considered tax-free in accordance with Section 368 of the Tax Code.
The IRS is looking to see if the requirement can be met by using historical business assets in a continuing business as well as taking into account the historical business of the SPAC and if it continues, Kelly Madigan, assistant branch manager in the office of the associate chief counsel (corporate), said Tuesday .
- “And while we haven’t seen one, we are also open to consideration of a request for a private letter to settle the matter, although there is” apparently no assurance of outcome or duration, “Madigan said at a virtual event of the Practicing Law Institute.
- “Well, I’m just going to plug in some kind of final plug and say that we are actively thinking about these issues. Therefore, we continue to welcome comments on both the substance and urgency of guidelines, particularly on our other priorities. ” She said.
- A private letter decision is a written statement from the IRS interpreting tax law based on a taxpayer’s specific situation.