KPMG Executive View   |   February 2018

 

Reverse Morris Trust

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.

Applicability

  • Company that is considering a business divestiture

Relevant dates

  • Effective immediately

Key impacts

  • 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

Report contents

  • 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


 

 

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