What is the reverse Morris Trust?

As a strategy of avoiding tax avoidance allows Reverse Morris Trust to spin the corporation to postpone assets, corporate divisions and other assets without taxing profits. Reverse Morris Trust is a variation of Morris Trust. For Spinoff without a tax, such as Morris Trust at work, there must be a parent company selling assets, a subsidiary and external buyers unrelated to a parent company; Financial legislation on these trades should be observed. In Morris Trust, the parent company will place all assets that do not participate in a transaction in a new publicly traded company, and allows the shopping company to merge with the remaining assets. Reverse Morris Trust differs because the subsidiary of the parent company is created using unfolded assets and is subsequently merged with the buyer. However, such an agreement must be the approval of mergers and acquisition regulators, however, satisfied a certain manner and satisfied certain regulations. These policies existto avoid tax evasion and ensure that shareholders in the parent company are not cheated.

50% test is the largest determinant of the legality of Morris Trust. According to this test, shareholders of the parent company must have more than 50% of ownership in a merged company. When the individual buys shares in a publicly traded company, he becomes effectively part of the business owner and is entitled to all assets and earnings. A dividend may even be issued, but most shareholders have no right to regular revenue payments and cannot affect managerial decisions such as reverse Morris Trust. Government regulatory bodies took 50% rule to ensure that the claims of shareholders for such assets are reconaruned despite the merger.

For example, let's assume that the Company A will sign a contract with B on the sale of assets. Rather than paying tax taxes can a company and includeThe closing condition that allows it to sort out assets into a new company known as CoCoring C. Because shareholders are entitled to such assets, they are 100% entrusted with C. To ensure justice and prevent fraud when B is connected when B is connected if B is connected by C. Without such rules, nothing is stopped by the company's management and to spin the most valuable assets of the company and pocket profits at the expense of the shareholder's own capital.