2026-10-11
Today we published two new charts dealing with the anti-abuse rules under section 304. In a 304 transaction, the E&P first comes out of the acquiror and then out of the target.
In both examples, the taxpayer is trying to manipulate which entity’s earnings should be deemed distributed. In Treas. Reg. §1.304-4(c), Example 1, a new entity is created to be the acquiring corporation (acquiror). In Treas. Reg. §1.304-4(c), Example 2, a new entity is created to be the target corporation (target or issuing). In both examples, the regulations disregard the newly-formed entity.
Tags: 304 Transactions, Charts - Situational Charts
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