Special rules for acquired S corpora- tions Sample Clauses

Special rules for acquired S corpora- tions. Except as provided in paragraph (b)(4) of this section, if a corporation (Y) for which an election under section 1362(a) was in effect is acquired, and a QSub election is made effective on the day Y is acquired, Y is deemed to liq- uidate into the S corporation at the be- ginning of the day the termination of its S election is effective. As a result, if corporation X acquires Y, an S cor- poration, and makes an S election for itself and a QSub election for Y effec- tive on the day of acquisition, Y liquidates into X at the beginning of the day when X’s S election is effec- tive, and there is no period between the termination of Y’s S election and the deemed liquidation of Y during which Y is a C corporation. Y’s taxable year ends for all Federal income tax pur- poses at the close of the preceding day. Furthermore, if Y owns Z, a corpora- tion for which a QSub election was in effect prior to the acquisition of Y by X, and X makes QSub elections for Y and Z, effective on the day of acquisi- tion, the transfer of assets to Z and the deemed liquidation of Z are dis- regarded. See §§ 1.1361–4(a)(2) and 1.1361– 5(b)(1)(i).
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Related to Special rules for acquired S corpora- tions

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  • REASONS FOR AND BENEFITS OF THE ACQUISITION The principal activities of the Group are investment holding, manufacturing and trading of printed circuit boards (the “Printed Circuit Boards Business”), trading of petroleum and energy products and related business (the “Petroleum and Energy Business”), and vessel chartering. In view of the ongoing trade war between the PRC and the US and the recent global coronavirus outbreak, there have been adverse impacts on the Printed Circuit Boards Business and the Petroleum and Energy Business. The Board expects that the Petroleum and Energy Business may be further affected due to (i) the increase of volatility of the oil price; (ii) the intensified competition in the oil trading business arising from slowing down of the international trade and the demand for oil and oil products; (iii) tightening of bank credits available to the Group; and (iv) ongoing legal proceedings against the Company. Therefore, the Group considers to diversify its business into other business sectors. The Acquisition is a good opportunity for the Group to diversify its business stream and mitigate the risks arising from the international trade. The Target Group’s business in the manufacturing and trading of printing and packaging products is based in Guangdong-Hong Kong-Macao Greater Bay Area and its clients are mainly from Hong Kong and the PRC. Over the years, with implementation of a series of operational strategies, including focusing more on sales orders for high-quality printing and packaging products with higher profit margin, stringent cost control measures and upgrading the manufacturing base by investing in new and advanced printing and packaging equipment, the Target Group has established its own brand and a long-term loyalty client base, which contributes to more than 50% of the Target Group’s revenue. Furthermore, in negotiating the Acquisition, the Vendor agreed to provide profit guarantees to the Purchaser as set out in the section headed “Profit guarantees and compensation” above, which provides a safeguard for the Company to closely monitor the development of the Target Group. The management of the Company believes that the printing and packaging business of the Target Group will have a synergy effect on the Group’s current business. With the new business sector, the Company would be able to provide printing and packaging, brand labelling and other logistics services to its existing customers. As the Group has an existing vessel chartering business, the management of the Company will further explore the possibility of transforming the existing vessels or hiring vessels to shipping cargoes such that the Group could further use its own resources to extend its business into logistics services. With the view to strengthen the Group’s long-term competitiveness and value, the Group plans to combine the high-quality printing business with intellectual property marketing to achieve a total marketing solution model to provide creative solution to its clients. In this way, the printing and packaging business is able to create a vertically integrated business to include selecting/designing intellectual property products which fit brand image, licensing from intellectual property holder and providing printed marketing materials and packages, etc. Currently, the Group is in the process of hiring staff who are experienced in marketing intellectual property products such as cartoon and movie images. The Consideration, which would be partially settled by the issue of Promissory Note, will not require substantial immediate cash outflow of the Group, therefore easing the financial burden of the Company. In the view of all above, the Board (including the independent non-executive Directors) considers that the Acquisition is fair and reasonable and is in the interests of the Company and its Shareholders as a whole.

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