A Good Old Habit, or Just an Old One? Preferential Tax Treatment for Reorganizations

65 Pages Posted: 23 Jan 2004

See all articles by Yariv Brauner

Yariv Brauner

University of Florida Levin College of Law

Abstract

This article proposes to repeal the preferential tax treatment of certain merger and acquisition transactions known as "reorganizations," and tax them like all other sales or exchanges. In the last 80 years this preference has been a cornerstone of our tax system. It is also one of the most stable rules in the tax code. Nevertheless, its normative justification is weak, and has never been rigorously debated in the legal literature. This article rejects the stated rationale for this rules - that such transactions trigger insufficient realization and therefore it is both unfair and impractical to currently tax them. It further demonstrates that the preferential tax treatment of reorganizations cannot be supported on efficiency grounds, applying the formerly unexploited (at least in the tax literature) wisdom available in the economic, business and corporate law literature. The latter conclusion is the primary contribution of this article.

Keywords: Reorganizations, Mergers and Acquisitions, Tax, Corporate Tax

JEL Classification: H20, H25, K34, G34

Suggested Citation

Brauner, Yariv, A Good Old Habit, or Just an Old One? Preferential Tax Treatment for Reorganizations. Northwestern Law & Econ Research Paper No. 04-02, Available at SSRN: https://ssrn.com/abstract=491904

Yariv Brauner (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States
3522730949 (Phone)

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