section 382

If a loss corporation issues stock to a public group in a tax-free reorganization, will the small issuance exception apply?

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If a loss corporation issues stock to a public group in a tax-free reorganization, will the small issuance exception apply?

It depends. The small issuance exception can only be applied to a tax-free reorganization that is a recapitalization under Internal Revenue Code § 368(a)(1)(E). It cannot be applied to any other type of tax-free reorganization.

See Treas. Reg. § 1.382-3(j)(6).

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