The Trade or Business Requirements
Introduction
To qualify as a nontaxable spin-off, the distributing corporation and the distributed (controlled) corporation must be actively conducting a trade or business immediately after the distribution.1 Furthermore, the trade or business of both corporations must have been actively conducted throughout the 5 years ending on the date of the distribution.2 The exception to this trade or business requirement is made for a corporate holding company that has no assets other than controlled corporations that are actively conducting a trade or business.3
The requirements for the active conduct of a trade or business present another barrier to the repeat of Mrs. Gregory’s attempt to spin off investment ...
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