KPMG demystifies Reverse Morris Trust (RMT) structures, which companies increasingly use to dispose of a business in a tax efficient manner. KPMG explores an RMT’s financial reporting effects as well as relevant IRS and SEC filing requirements.
- Company that is considering a business divestiture
- An RMT is a structure in which a company spins off a business to its shareholders, and the divested business is then acquired by another company
- For the transaction to remain non-taxable, the shareholders of the divested business must retain more than 50% of the value and voting rights of the combined entity
- Because the transaction may receive beneficial tax treatment compared with other dispositions, companies are using these structures with greater frequency
- What is a Reverse Morris Trust?
- What should companies consider when using RMTs?
- Structure of a Reverse Morris Trust
- Typical steps to create RMT transactions
- Parent Co’s accounting
- Acquirer Co’s accounting
- Tax considerations
- SEC requirements
- Financial statements