Home > Journals > Michigan Law Review > MLR > Volume 60 > Issue 6 (1962)
Stock and securities of controlled corporations may be distributed to shareholders, tax free, in cases of corporate separations which qualify under section 355 of the Internal Revenue Code of 1954. A corporate separation is effected by the transfer of part of a corporation's assets to a subsidiary, the stock of which is distributed to the parent's stockholders. Such distributions are generally classified into three categories: spin-off, split-off, and split-up. A spin-off occurs when corporation A forms corporation B to which A transfers certain assets, receiving in exchange, the stock of corporation B. A then distributes the stock of B to its shareholders in the form of a simple dividend of stock. A modified version of this would be a case in which A merely distributes the stock of a controlled subsidiary. A split-off differs only in that the stock of B is distributed to A's stockholders in exchange for some of their stock in A. A split-up takes place when A forms two (or more) corporations- B and C-to which A transfers all of its assets, in exchange for all the stock of B and C, which stock is then distributed to A's stockholders in complete liquidation of A. An alternative method for classifying these distributions would divide them into only two groups-those which are in the form of an exchange of stock (split-up and split-off) and those which are in the form of a simple dividend of stock (spin-off).
Roger B. Harris S.Ed.,
Taxation-Federal Income Taxation-Examination of Certain Problems Under Section 335,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol60/iss6/4
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