Reconciling Business Purpose with Bail-out Prevention: Federal Tax Policy and Corporate Divisions

Authors

Stephen B. Cohen, Georgetown University Law CenterFollow

Document Type

Article

Publication Date

1976

Abstract

Corporate divisions-spin-offs, split-offs, and split-ups-unfortunately pose a more complex problem than Senator Humphrey's childlike vision would lead one to believe: the reconciliation of competing goals of maximizing business flexibility and minimizing tax avoidance. It is widely believed that divisions are essential to business planning; thus, tax-free treatment promotes business flexibility. Yet, an untaxed division may allow tax avoidance through "bail-out" of corporate earnings and profits at capital gain rates.

Publication Citation

28 Stan. L. Rev. 1077-1106

Scholarly Commons Citation

Cohen, Stephen B., "Reconciling Business Purpose with Bail-out Prevention: Federal Tax Policy and Corporate Divisions" (1976). Georgetown Law Faculty Publications and Other Works. 1704.
https://scholarship.law.georgetown.edu/facpub/1704