Phil Rees
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Splitting a "Schedule A" company

Splitting a "Schedule A" company

It may be necessary to split up a property owning company.  The properties are all standing at large gains and I see the tax consequences of transferring half of them to a new company as being prohibitive.

Any ideas?

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By wdr
06th Sep 2010 18:21

Splitting Schedule A company

It certainly is possible to do this, provided the necessary clearances under ITA s701/CTA s748 are obtained.

Typically two shareholders want to go different ways, or a purchaser does not want to buy all the properties in a company, but is prepared to buy a company holding a target property[example where buyer is a REIT].

The usual model is to form  two newco's which will ultimately own the properties. The properties are then transferred to the two companies, and the original company is liquidated, with each shareholder taking one of the newco's.

Reconstruction relief is available, but watch out for a degrouping charge.

Erasmus

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