Rev. Rul. 69-516

Advice has been requested whether, under the circumstances described below, a change of place of incorporation of a corporation may be a "reorganization" within the meaning of section 368(a)(1)(F) of the Internal Revenue Code of 1954.

Corporation X desired to acquire substantially all of the assets of corporation Y in a transaction within the meaning of section 368(a)(1)(C) of the Code. For valid business purposes and as part of an overall plan, Y organized Z in another state and merged into Z in accordance with the applicable state laws. Immediately thereafter, substantially all of the Z assets were acquired by X solely in exchange for X voting stock. The X voting stock was distributed to the Z shareholders and Z was then dissolved.

In order for a transaction to qualify under section 368(a)(1) of the Code, there must be a continuation of interest on the part of the persons who were the owners of the enterprise prior to the reorganization. See section 1.368-1(b) of the Income Tax Regulations. In the instant case Y merely changed its place of incorporation. The Y shareholders had the same interests in Z after the exchange as they had in Y before the exchange.

Accordingly, the change of state of incorporation qualified as a reorganization under section 368(a)(1)(F) of the Code even though it was a step in the transaction in which X acquired substantially all of the assets of Z in a transaction within the meaning of section 368(a)(1)(C) of the Code.