Home Knowledge Mergers & Acquisitions in the US Tax Considerations Tax Free Transactions Type C

Type C Reorganization (Shares for Assets)

A Type C reorganization is an acquisition of a Target’s assets and liabilities in exchange for Buyer shares that is described in paragraph C of Section 368(a)(1) of the Internal Revenue Code.  Conceptually, a Type C reorganization is similar to a Type B reorganization, except that it is an acquisition of assets rather than shares.  Practically, a Type C reorganization is most similar to a Type A reorganization, except that “substantially all” of the Target’s assets need to be acquired (as opposed to 100% of the Target’s assets in a Type A reorganization) an consideration must be at least 80% Buyer stock (as opposed to 50% Buyer;s stock in a Type A reorganization).


In a Type C reorganization, the Buyer must acquire “substantially all” of the Target’s assets.  “Substantially all” means 90% of the Target’s net assets or 70% of its gross assets.

Unlike a Type B reorganization, in a Type C reorganization, cash or other assets may be used as consideration.  However, at least 80% of the deal value must be paid for using voting shares of the Buyer.  The portion of the consideration paid in any form other than Buyer voting stock is taxable to the seller.

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  • Up to 20% of the deal consideration may be cash or other assets
  • Procedures are simple
  • Buyer can record acquired assets at market value, thereby stepping up the basis of acquired assets


  • Substantially all assets must be transferred, so limited ability to cherry-pick
  • Assumed liabilities count as part of the 20% non-voting share consideration
  • Target must liquidate itself

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