CONTINUITY OF PROPRIETARY INTEREST Sample Clauses

CONTINUITY OF PROPRIETARY INTEREST. The Stockholder will exchange in the Merger at least fifty percent (50%) of the value of Stockholder's proprietary interest in the Company for a proprietary interest in Expedia and not for consideration other than Expedia Common Shares. The Stockholder is not a "related person" with respect to Expedia or Company, within the meaning of Treas. Reg Section 1.368-1(e)(3). The Stockholder has no plan or intention to dispose of any Expedia Common Shares received in the Merger to Expedia or a person related to Expedia within the meaning of Treas. Reg. Section 1.368-1(e)(3).

CONTINUITY OF PROPRIETARY INTEREST. The requirement that the original owners retain a continuing interest in the reorganized corporation in order to have a tax-free reorganization, arose, much like the requirement for the presence of a business purpose, as a result of the judicial efforts to confine the reorganization provisions to their proper function, and to eliminate any disguised sales. Reg. §1.368-1(e)(1)(i). Because the statutory definition of the Merger does not include any requirement as to the type or extent of consideration received, it is necessary to look at a number of cases to determine the requirements. The Supreme Court has held that the acquisition of substantially all the properties of one corporation by another in exchange for cash and short term promissory notes did not satisfy the Continuity of Interest doctrine. Cortland Specialty Co. v. CIR, 60 F2d. 937 (2nd Cir.), cert. denied 288 US 599 (1932). Nor are short term purchase money notes adequate. Pinellas Ice & Cold Storage Co. v. CIR, 287 US 462 (1933). The Supreme Court in Helvering v. Minnesota Tea Co, 296 US 378 (1935), held that the seller must acquire a definite and material interest in the purchasing company, and that interest “must represent a substantial part of the value of the thing transferred.” Ibid p. 385-386. In Minnesota Tea the Supreme Court held that where fifty-six (56%) of the consideration was equity that is sufficient. Over the years, two distinct aspects of the Continuity of Interest requirement have evolved. The first is the qualitative nature of the consideration, which must be an equity interest, whether common or preferred stock. The second element is the relative amount of the equity interest received compared to the entire consideration received. B&E paragraphs 12.21 [1], [3]. The courts have consistently held that stock, whether common or preferred, voting or non-voting, is sufficient to satisfy the equity interest requirement. As to the quantitative side of the equation, the Supreme Court has held that thirty-eight percent (38%) non-voting preferred stock is sufficient Xxxx X. Xxxxxx Co. x. Xxxxxxxxx, 296 US 374 (1935). Even twenty-five percent (25%) of common stock is sufficient. Xxxxxx v. CIR, 84 F.2d 415 (6th Cir. 1936). However, the Internal Revenue Service (“IRS”) has adopted certain guidelines setting forth its requirements for advance rulings. Rev. Proc. 77-37, 1977-2 CB 568. The IRS will not rule favorably on a merger unless, among other things, the acquired corporation’s sharehol...