EXHIBIT 8
_____________________________, 1998
PERSONAL AND CONFIDENTIAL
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BY HAND
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DRAFT
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Xx. Xxxxxxx X. Xxxxx
Xxxxxxx Holding Corporation
000 Xx. Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000
Xx. Xxxx X. Xxxxx
The First National Bancorp of Greenville, Inc.
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Dear Messrs. Xxxxx and Xxxxx:
This opinion is being furnished to you in connection with the proposed
acquisition of The First National Bancorp of Greenville, Inc. ("Holding") and
its wholly owned banking subsidiary, The First National Bank of Greenville
("Bank"), by Whitney Holding Corporation ("Whitney"), which will be completed on
___________________________,1998 ("the Effective Date"). You have requested our
opinion concerning the following:
. That the merger of Holding into Whitney will qualify as a reorganization
under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
("the Code").
. That the exchange of Holding common stock to the extent exchanged solely
for Whitney common stock will not give rise to gain or loss for federal
income tax purposes to the holders of Holding common stock with respect to
such exchange.
. That the merger of Bank into Whitney National Bank ("WNB"), a wholly-owned
banking subsidiary of Whitney, will qualify as a reorganization under
Section 368(a)(1)(A) of the Code.
You have asked for our opinion on the federal income tax consequences to
Whitney, Holding, Bank, WNB and the stockholders of Holding. In rendering our
opinion, we have relied upon the accuracy and completeness of the facts,
assumptions, and information as contained in the Agreement and Plan of Merger
dated as of March 24, 1998 (in each case, without regard to any
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limitation based on Xxxxxxx'x or Holding's knowledge or belief). ("Plan of
Merger"), including all exhibits attached thereto, the Registration Statement on
Form S-4, and the representations included below. You have represented that
such facts, assumptions, and representations are true, correct, and complete.
However, we have not independently audited or otherwise verified any of these
facts, assumptions, or representations. A misstatement or omission of any fact
or a change or amendment in any of the facts, assumptions, or representations
upon which we have relied may require a modification of all or a part of this
opinion.
PREMISE OF OPINION
------------------
Our opinion is based solely on our interpretation of the Code; U.S. federal
income tax regulations thereunder; relevant judicial decisions; and guidance
issued by the Internal Revenue Service (the "Service") including revenue rulings
and revenue procedures; and other authorities that we deemed relevant; in each
case as of the date of this opinion.
U.S. federal income tax laws and regulations, and the interpretations thereof,
are subject to change, which changes could adversely affect this opinion. If
there is a change in the Code, the regulations thereunder, the administrative
guidance issued thereunder, or in the prevailing judicial interpretation of the
foregoing, the opinion expressed herein would necessarily have to be reevaluated
in light of any such changes. Our opinion is as of the date of this letter and
we have no responsibility to update this opinion for changes in applicable law
or authorities occurring after this date.
Our opinion does not address the potential tax consequences of any transactions,
events, or circumstances other than the transactions as described herein. In
addition, our opinion is limited to the U.S. federal income tax consequences set
forth below. Our opinion does not address any non-income, state, local, or
foreign tax consequences of the transactions. We also express no opinion on
non-income tax issues, such as corporate law or securities matters.
This opinion does not address the U.S. federal income tax consequences of the
transactions to any Holding common stockholder that has a special status,
including (without limitation) insurance companies; financial institutions;
broker-dealers; foreign corporations; estates and trusts not subject to U.S.
federal income tax on their income regardless of source; and persons who are not
citizens or residents of the United States; and persons who acquired stock as
the result of the exercise of an employee stock option, pursuant to an employee
stock purchase plan, or otherwise as compensation.
Our opinion is not binding on the Service, and there can be no assurance that
the Service will not take positions contrary to such opinion or will not be
successful in sustaining such contrary positions. However, should the Service
challenge the U.S. federal income tax treatment of the
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matters discussed below, our opinion reflects our assessment of the probable
outcome of litigation based solely on an analysis of the existing authorities
relating to such matters.
This opinion is solely for the benefit of Holding, Whitney, Bank, and WNB, and
is not intended to be relied upon by anyone other than Holding, Whitney, Bank,
and WNB. Although you do hereby have our express consent to inform Holding
common stockholders of our opinion by including copies of this letter as an
exhibit in the Registration Statement on Form S-4 for the proposed transaction
and by making reference to us and our opinion in the Proxy Statement-Prospectus
forming a part of the Registration Statement, we assume no responsibility for
any tax consequences to them. Instead, each of these parties should consult and
rely upon the advice of his/her/its counsel, accountant or other tax advisor.
Except to the extent expressly permitted hereby, and without the prior written
consent of this firm, this letter may not be quoted in whole or in part or
otherwise referred to in any documents or delivered to any other person or
entity.
PROPOSED TRANSACTIONS
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Our understanding of the proposed transactions, as described in the Plan of
Merger, is as follows:
A. Holding will be merged with and into Whitney ("Company Merger") on the
Effective Date and at the Effective Time pursuant to the Louisiana
Business Corporation Law and the Alabama Business Corporation Law.
B. On the Effective Date and pursuant to the Company Merger, except for
shares of Holding common stock as to which dissenter's rights have been
perfected and not withdrawn or otherwise forfeited, and except for shares
held by Holding as treasury shares which shall by reason of the Company
Merger be canceled, each issued and outstanding share of Holding common
stock shall be converted into shares of Whitney common stock based on the
terms contained in section 2 of the Plan of Merger. As a result of the
Company Merger, the stockholders of Holding will own less than 5% of the
outstanding stock of Xxxxxxx. In lieu of issuing fractional shares of
Whitney common stock as a result of the Company Merger, common
stockholders of Holding will be entitled to receive a cash payment equal
to such fractional share multiplied by the designated value of a share of
Whitney common stock.
C. Subsequent to the Company Merger, Bank will be merged with and into WNB
("Bank Merger") under the Articles of Association of WNB pursuant to the
provisions of 12 U.S.C. Section 215a, et. seq. No additional shares of WNB
stock will be issued, and all of the outstanding stock of Bank will be
canceled, as a result of the Bank Merger. The Bank
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Merger shall become effective at the time specified or permitted by the
Comptroller in a certificate or other written record issued by the Office of the
Comptroller of the Currency.
ADDITIONAL REPRESENTATIONS
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In addition to the representations included in the Plan of Merger, the following
representations have been made to us by representatives of Whitney, WNB,
Holding, and Bank:
a) Xxxxxxx, WNB, Holding, Bank, and the stockholders of Holding will pay their
respective expenses, if any, incurred in connection with the successful
consummation of the transaction.
b) There is no indebtedness existing between any member of the Holding
consolidated group, on the one hand, and any member of the Whitney
consolidated group on the other hand.
c) The fair market value of the assets of Holding transferred to Whitney will
equal or exceed the sum of the liabilities assumed by Xxxxxxx plus the
amount of liabilities, if any, to which the transferred assets are subject.
d) The shareholders of Holding do not own, directly or constructively, stock
in Whitney that comprises a 50 percent or greater controlling interest in
Whitney pursuant to Section 304(c).
e) The fair market value of the assets of Bank transferred to WNB will equal
or exceed the sum of the liabilities assumed by WNB plus the amount of
liabilities, if any, to which the transferred assets are subject.
f) None of the compensation received by any stockholders that are employees of
either Holding or Bank ("stockholder-employees") will be separate
consideration for, or allocable to, any of their shares of Holding common
stock; none of the shares of Whitney common stock received by any
stockholder-employees will be separate consideration for, or allocable
to, any employment agreement; and the compensation paid to any
stockholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length
for similar services.
g) Holding will be merged with and into Whitney, pursuant to the Louisiana
Business Corporation Law and the Alabama Business Corporation Law.
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h) Except for restrictions placed upon the disposition of Whitney common stock
pursuant to agreements made by certain officers, directors and shareholders
of Holding in the shareholder commitments referred to in Section 6.02(g) of
the Plan of Merger and Rule 145 under the federal securities laws, the
Holding common stockholders will have unrestricted rights of ownership of
Whitney common stock received in the transaction, and their ability to
retain the Whitney common stock received in the transaction will not be
limited in any way.
i) The ratio for the exchange of shares of Holding common stock for Whitney
common stock in the transaction was negotiated through arm's length
bargaining. Accordingly, the fair market value of the Whitney common stock
to be received by Holding common stockholders in the transaction will be
approximately equal to the fair market value of the Holding common stock
surrendered by such stockholders in exchange therefor.
j) The shareholders of Holding will receive in exchange for their Holding
common stock a number of shares of Whitney common stock having a fair
market value equal to at least 50% of the value of their Holding stock on
the Effective Date. Except for cash received for fractional shares
discussed below, under the terms of the Plan of Merger the shareholders of
Holding who do not exercise dissenters' rights will receive solely Whitney
common stock in exchange for their Holding stock. Redemptions or
acquisitions of Holding stock by Holding or any related party and
extraordinary distributions (i.e., distributions with respect to stock
other than regular, normal dividends), prior to and in connection with the
transactions will be taken into account for purposes of this
representation.
k) Neither Whitney, WNB, Holding, Bank, nor any related party has any plan or
intention to reacquire any of the stock issued in the transaction. For
purposes of this opinion, a "related party" includes any corporation (i)
that is a member of any affiliated group, as defined in Section 1504
(determined without regard to Section 1504(b)), of which Xxxxxxx is a
member, or (ii) whose purchase of Whitney stock would be treated as a
distribution in redemption of stock of Whitney under Section 304(a)(2)
(determined without regard to Reg. Section 1.1502-80).
The following representations have been made to us by representatives of Xxxxxxx
and WNB:
l) Whitney and WNB have no plan or intention to sell or otherwise dispose of
any of the assets of Holding or Bank acquired in the transactions, except
for dispositions made in the ordinary course of business or transfers
described in Section
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368(a)(2)(C) of the Code, and except for Bank common stock to be canceled
in the Bank Merger.
m) Neither Whitney, WNB, nor any related party under Section 304(c) currently
own any stock interest in Holding or Bank.
n) Following the transactions, Whitney and WNB will continue the historic
businesses of Holding and Bank, respectively, or use a significant portion
of these historic business assets in the operation of a trade or business.
o) The payment of cash in lieu of fractional shares of Whitney common stock is
solely for the purpose of avoiding the expense and inconvenience to Whitney
of issuing fractional shares and does not represent separately bargained-
for consideration. The total cash consideration that will be paid in the
transaction to the Holding stockholders instead of issuing fractional
shares of Whitney common stock will not exceed (1) one percent of the total
consideration that will be issued in the transaction to the Holding
stockholders in exchange for their shares of Holding common stock. The
fractional share interests of each Holding stockholder will be aggregated,
and no Holding stockholder will receive cash for such fractional share
interests in an amount equal to or greater than the value of one full share
of Whitney common stock.
p) The assumption by Xxxxxxx of the liabilities of Holding, and WNB of the
liabilities of Bank, pursuant to the transactions are for bona fide
business purposes and the principal purpose of such assumptions is not the
avoidance of federal income tax on the transfer of assets of Holding to
Whitney, or Bank to WNB, respectively, pursuant to the transactions.
q) Whitney and WNB are not investment companies as defined in Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
r) The proposed transactions are being undertaken for reasons germane to the
continuance of the business of Xxxxxxx and WNB.
s) Bank will be included as a member of the Whitney consolidated group as
defined in Section 1504 immediately after the Company Merger and will
remain a member of such group until the consummation of the Bank Merger.
t) There is no plan or arrangement to have WNB leave the Whitney consolidated
group.
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u) WNB and Bank will be members of the same consolidated group at the time of
the Bank Merger, and all parties will treat the Bank Merger as occurring
between two members of a single consolidated group.
v) Bank will be merged with and into WNB under the Articles of Association of
WNB pursuant to the provisions of 12 U.S.C. Section 215a, et. seq.
The following representations have been made to us by representatives of Holding
and Bank:
w) The liabilities of Holding and Bank assumed by Xxxxxxx and WNB,
respectively, and the liabilities to which the transferred assets of
Holding and Bank are subject were incurred by Holding and Bank in the
ordinary course of business.
x) Holding and Bank are not investment companies as defined in Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
y) Holding and Bank are not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
z) The proposed transaction is being undertaken for reasons germane to the
continuance of the business of Holding and Bank.
ANALYSIS OF APPLICABLE FEDERAL TAX PROVISIONS
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A. Exchange of Whitney Stock for Holding Stock
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Section 354(a)(1) addresses the effects of corporate reorganizations on
shareholders, providing in general that no gain or loss shall be recognized if
stock or securities in a corporation a party to a reorganization are, in
pursuance of the plan of reorganization, exchanged solely for stock or
securities in such corporation or in another corporation, a party to the
reorganization.
For purposes of Section 354, the terms "reorganization" and "party to a
reorganization" mean only a reorganization or a party to a reorganization as
defined in Sections 368(a) and 368(b). Section 368(a)(1)(A) states that the
term reorganization includes a statutory merger or consolidation. Reg. Section
1.368-2(b)(1) states that in order for a transaction to qualify as a
reorganization under Section 368(a)(1)(A), the transaction must be a merger or
consolidation effected pursuant to the corporation laws of the United States or
State or Territory or the District of Columbia. Under Section 368(b), the term
party to a reorganization includes both
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corporations in the case of a reorganization resulting from the acquisition by
one corporation of stock or properties of another.
Based on the representations set forth above and the representations included in
the Plan of Merger, the merger of Holding into Whitney under the Louisiana
Business Corporation Law and the Alabama Business Corporation Law and the merger
of Bank into WNB under the provisions of 12 U.S.C. Sec. 215a will qualify as a
reorganization under Section 368(a)(1)(A). In addition, the merger of Bank into
WNB may qualify as a reorganization under Section 368(a)(1)(D) by virtue of
Section 354, since it may occur up to one year following the merger of Holding
into Whitney. That section provides, in relevant part, that a transfer by a
corporation of substantially all of its assets to another corporation is a tax
free reorganization if immediately after the transfer the transferor
corporation, or one or more of its shareholders (including persons who were
shareholders immediately before the transfer) is in control of the corporation
to which the assets are transferred; but only if, in pursuance of the plan of
reorganization, stock or securities of the corporation to which the assets are
transferred are distributed in a transaction which qualifies under section 354
or 356. The instant case may qualify as a type "D" reorganization because
Whitney, as the sole shareholder of Bank immediately before the merger of Bank
into WNB, will control WNB immediately after the merger (control being defined
with reference to Section 304(c) in this case). See Rev. Rul. 75-161, 1975-1 CB
114 (a type "A" reorganization may also qualify as a type "D" reorganization).
Under this Revenue Ruling, where these reorganization provisions overlap, the
provisions of Section 357(c)(1)(B) governing gain recognition where liabilities
exceed basis in a "D" reorganization may apply. However, under Reg. Section
1.1502-80(d), Section 357(c) does not apply to the transaction in question since
WNB and Bank will be members of the same consolidated group at the time of the
Bank Merger, and there is no plan or arrangement for WNB to leave the
consolidated group.
B. Additional Regulatory Requirements Relating to Tax-Free Reorganizations
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The regulations under Section 368 require as a part of a reorganization a
continuity of the business enterprise under the modified corporate form, a bona
fide business purpose for the reorganization, and a continuity of interest.
Reg. Section 1.368-1(d)(2) states that the continuity of business enterprise
requirement is met if the acquiring corporation either continues the acquired
corporation's historic business or uses a significant portion of the acquired
corporation's business assets in the operation of a trade or business. Based on
the representations set forth above, the continuity of business enterprise
requirement is met with respect to the assets and business operations of Holding
and Bank.
Reg. Section 1.368-2(g) indicates that in addition to coming within the scope of
the specific language of Sec. 368(a), a reorganization must also be "undertaken
for reasons germane to the
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continuance of the business of a corporation a party to the reorganization." If
the transaction or series of transactions has no business or corporate purpose,
then the plan is not a reorganization pursuant to Section 368(a). [Reg. Section
1.368-1(c).] In the Proxy Statement-Prospectus, a discussion of the reasons for
the Plan of Merger is included. In general, there is a desire to combine the
financial and managerial resources of WNB and Bank to pursue consumer and
commercial banking business in markets currently served by Bank. Xxxxxxx'x
business strategy includes expansion in the Gulf Coast region, and Whitney's
management identified Bank as an institution that fits well with this strategy.
With respect to Holding and Bank, the business, prospects, and financial
conditions of Bank and Whitney, and the general favorable impact of the merger
of Holding into Whitney on various constituencies serviced by Bank, including
its customers, employees and communities were factors in the decision to
adopt the Plan of Merger. Based on the reasons stated in the Proxy
Statement-Prospectus and the representations set forth above, the transactions
meet the business purpose requirement.
The continuity of interest requirement must also be met. That doctrine does not
require that all shareholders of the acquired corporation receive a proprietary
interest in the surviving corporation in the transaction; it is not even
necessary for a substantial percentage of such shareholders to receive such an
interest. The IRS indicated in Revenue Procedure 77-37 that a sufficient
proprietary interest is an interest with a value that is at least 50% of the
total equity value of the acquired corporation. Further, unlike prior IRS
position, under recently finalized regulations such shareholders are generally
not required to retain their interests in the reorganized entity, as discussed
below.
The IRS has recently finalized regulations in the continuity of interest area
that greatly liberalize the rules. In general, provided a sufficient amount of
stock is issued in the transaction to establish requisite continuity of
interest, new Treas. Reg. (S)1.368-1(e) permits shareholders to dispose of such
stock immediately following the reorganization (provided that such disposition
is not made to the issuing corporation or a corporation related to the issuing
corporation).
Under the regulations, continuity of interest is met if, in substance, a
substantial part of the value of the proprietary interests in the target
corporation are preserved in the reorganization. In this regard, a proprietary
interest in the target corporation generally is preserved if, in a potential
reorganization, it is exchanged for a proprietary interest in the acquiring
corporation (or, for purposes of this opinion, a corporation in control of the
acquiring corporation, within the meaning of Section 368(c)). However, a
proprietary interest in the target corporation generally is not preserved if, in
connection with the potential reorganization, it is acquired for consideration
other than stock of the acquiring corporation, or stock of the acquiring
corporation furnished in the transaction is redeemed.
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All facts and circumstances must be considered in determining whether, in
substance, a proprietary interest in the target corporation is preserved.
Importantly, for purposes of the continuity of interest requirement, a mere
disposition of stock of the target corporation prior to a potential
reorganization to persons not related to the target corporation (as defined
below) or to persons not related to the acquiring corporation is disregarded.
In addition, a mere disposition of stock of the acquiring corporation received
in a potential reorganization to persons not related to the acquiring
corporation is disregarded. In this regard, two corporations are related if
they are members of the same affiliated group as defined in section 1504
(determined without regard to section 1504(b)); or a purchase of the stock of
one corporation by another corporation would be treated as a distribution in
redemption of the stock of the first corporation under section 304(a)(2)
(determined without regard to section 1.1502-80(b)).
In addition to the final regulations, the IRS issued temporary and proposed
regulations (Treas. Reg. 1.368-1T(e)) providing that a proprietary interest in
Target is not preserved if, in connection with a potential reorganization, it is
redeemed or acquired by a person related to Target, or to the extent that, prior
to and in connection with a potential reorganization, an extraordinary
distribution is made with respect to it.
Based on the representations set forth above, the transactions meet the
continuity of interest requirement because a sufficient proprietary interest in
Xxxxxxx is issued to the former Holding shareholders.
Other Operational Code Provisions
---------------------------------
Section 356(a)(1) provides that if Section 354 would apply to an exchange but
for the fact that the property received in the exchange consists not only of
property permitted to be received under Section 354 without the recognition of
gain but also of other property or money then the gain, if any, to the recipient
shall be recognized but not in excess of the sum of money and the fair market
value of such other property. Section 356(c) states that no loss from the
exchange may be recognized by the shareholder.
In other official pronouncements (Rev. Rul. 74-515, 1974-2 C.B. 118; Rev. Rul.
74-516, 1974-2 C.B. 121), the Service has treated the distribution of cash
distributed as part of a reorganization and in a transaction subject to Section
356 considerations by applying the redemption principles under Section 302.
Section 302 provides, in part, that a redemption will be treated as a
distribution in part or full payment in exchange for stock if it can meet the
tests of that section.
In Rev. Rul. 66-365, the Service announced that in a transaction qualifying as a
reorganization under Section 368(a)(1)(A) of the Code where a cash payment is
made by the acquiring
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corporation in lieu of fractional shares and is not separately bargained for,
such cash payment will be treated under Section 302 of the Code as in redemption
of fractional share interests. Therefore, each shareholder's redemption will be
treated as a distribution in full payment in exchange for his or her fractional
share interest under Section 302(a) of the Code and accorded capital gain or
loss treatment provided the redemption is not essentially equivalent to a
dividend and that the fractional shares redeemed constitute a capital asset in
the hands of the holder as discussed below. In Rev. Proc. 77-41, the Service
stated that "a ruling will usually be issued under Section 302(a) of the Code
that cash to be distributed to shareholders in lieu of fractional share
interests arising in corporate reorganizations...will be treated as having been
received in part or in full payment in exchange for the stock redeemed if the
cash distribution is undertaken solely for the purpose of saving the corporation
the expense and inconvenience of issuing and transferring fractional shares, and
is not separately bargained-for consideration."
Under Section 358(a)(1), in the case of an exchange to which Section 354 or
Section 356 applies, the basis of property which is permitted to be received
under such section without the recognition of gain or loss shall be the same as
that of the property exchanged, decreased by the amount of any money received by
the recipient and the amount of loss recognized by the recipient as a result of
the exchange and increased by the amount which was treated as a dividend and the
amount of other gain recognized by the recipient as a result of the transaction.
It should be noted that where cash is received in lieu of fractional shares, the
substance of the transaction is that of a hypothetical receipt of the fractional
shares and then a redemption of such shares. Therefore, the basis that is to be
allocated to the stock of the acquiring corporation received must be allocated
to the shares retained and the fractional shares hypothetically received. The
---
gain or loss attributable to the receipt of cash in lieu of fractional shares is
measured by comparing the cash received with the basis allocated to the
fractional shares that are hypothetically received, and such gain or loss is
recognized as discussed earlier pursuant to Rev. Rul. 66-365.
In other instances where other property or money is also received under Section
356, the redemption principles of Section 302 are applied to determine if the
payments should be treated as dividend distributions or payments in exchange for
stock. Thus, cash payments made by the acquiring corporation to a dissenting
shareholder of the acquired corporation in a reorganization under Section 368
are treated as made in exchange for the shareholder's stock if the payment meets
the requirements of Section 302. The Supreme Court in Xxxxx vs. Comr., 489 U.S.
---------------
726, applied the tests of Section 302 by viewing the exchange involving cash or
other property as a "hypothetical post-reorganization redemption." The Court
viewed the exchange as first an exchange of solely stock of the acquiring
corporation for the acquired company stock, followed by an exchange by the
shareholder of the newly acquired stock for cash from the acquiring corporation.
The Section 302 tests were applied to the second hypothetical exchange.
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Note, to the extent that cash received by a dissenting shareholder represents a
payment of interest, such cash will generally be taxed as ordinary income with
no basis offset.
One of the tests of Section 302 provides that where there is a complete
redemption of all of a shareholder's stock in a corporation (after consideration
of the constructive ownership rules of Section 302(c)), the redemption payment
is treated as made entirely in exchange for the shareholder's stock in the
corporation (Section 302(b)(3)). The constructive ownership rules of Section
302(c) are generally contained in Section 318 and provide that an individual or
entity is treated as owning the stock owned by certain other related individuals
and entities. Where there is a complete termination of the shareholder's
interest, the constructive ownership rules may be waived if certain conditions
are met.
Code Section 361(a) states that, as a general rule, no gain or loss is to be
recognized by a corporation if such corporation is a party to a reorganization
and exchanges property, in pursuance of the plan of reorganization, solely for
stock or securities in another corporation a party to the reorganization.
Section 361(b) states that if Section 361(a) would apply to an exchange but for
the fact that the property received in exchange consists not only of stock or
securities afforded nonrecognition treatment under Section 361(a), but also of
other property or money, then provided the corporation receiving such other
property or money distributes it in pursuance to the plan of reorganization, no
gain to the corporation shall be recognized from the exchange. Section 361(c)
states that as a general rule no gain or loss shall be recognized to a
corporation a party to a reorganization on the distribution to its shareholders
of any stock in another corporation which is a party to the reorganization if
such stock was received by the distributing corporation in the exchange.
Section 1032(a) states that no gain or loss shall be recognized to a corporation
on the receipt of money or other property in exchange for such corporation's
stock, including treasury stock.
Code Section 362(b) states that the basis of property received by the acquiring
corporation in a reorganization is the same as it would be in the hands of the
transferor of the assets, increased by any gain recognized by the transferor.
The transferors for purposes of the preceding sentence in the instant case are
Holding and Bank.
Section 1221 defines a capital asset as property held by the taxpayer which is
not inventory or other property held by the taxpayer primarily for sale to
customers in the ordinary course of a trade or business, property used in the
taxpayer's trade or business subject to the allowance for depreciation under
Section 167, a copyright, literary, musical or artistic composition, a letter or
memorandum, or similar property created by the personal efforts of the taxpayer,
accounts or notes receivable acquired in the ordinary course of a trade or
business for services rendered or from the sale of inventory or other property
held by the taxpayer primarily for sale to
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customers in the ordinary course of business, or a publication of the United
States Government which is received from the United States Government or any
agency thereof other than by purchase at the price at which it is offered for
sale to the public.
Section 1223(1) states that in determining the period for which a taxpayer has
held property received in an exchange, there shall be included the period for
which he or she held the property exchanged if the property has, for the purpose
of determining gain or loss from a sale or exchange, the same basis as the
property exchanged and the property exchanged was a capital asset as defined in
Section 1221 as of the date of the exchange.
Section 1223(2) states that for determining the period for which the taxpayer
has held property however acquired there shall be included the period for which
such property was held by another person if the property has the same basis in
whole or in part in his hands as it would have had in the hands of such other
person.
Subchapter P of Chapter 1 of the Code provides limitations on the recognition of
capital gains and losses including, but not limited to, the allowance of capital
losses to the extent of capital gains with respect to corporate taxpayers and
the allowance between $1,500 and $3,000 of net capital losses with respect to
taxpayers other than corporate taxpayers.
OPINION
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Based upon all of the foregoing, including representations of the management of
Whitney, WNB, Holding, and Bank, it is our opinion that:
a) The merger of Holding with and into Whitney, as described above, will
constitute a reorganization under Section 368 of the Code (Section
368(a)(1)(A)).
b) Holding and Xxxxxxx will each be "a party to a reorganization" (Section
368(b)).
c) No gain or loss will be recognized by the common stockholders of Holding on
the receipt of solely Whitney common stock in exchange for surrendered
Holding common stock pursuant to the plan of reorganization (Section
354(a)(1)).
d) The tax basis of the Whitney common stock received by Holding common
stockholders will be the same as the basis of the Holding common stock
surrendered in exchange therefor, decreased by the amount of basis
allocated to the fractional shares that are hypothetically received by the
stockholder and redeemed for cash (Section 358(a)(1)).
Xx. Xxxxxxx X. Xxxxx
Xx. Xxxx X. Xxxxx
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e) The holding period of the Whitney common stock received by the Holding
common stockholders will include the period during which the Holding common
stock surrendered in exchange therefor was held, provided that the Holding
common stock is held as a capital asset in the hands of the Holding
stockholders on the Effective Date (Section 1223(1)).
f) The payment of cash in lieu of fractional share interests of Whitney common
stock will be treated as if each fractional share was distributed as part
of the exchange and then redeemed by Xxxxxxx. Subject to the conditions and
limitations of Section 302(a) of the Code, these cash payments will be
treated as having been received as distributions in full payment in
exchange for the Whitney common stock. Any gain or loss recognized upon
such exchange (as determined under Section 1001 and subject to the
limitations of Section 267) will be capital gain or loss provided the
fractional share would constitute a capital asset in the hands of the
exchanging stockholder (Rev. Rul. 66-365 and Rev. Proc. 77-41).
g) Each shareholder of Holding who elects to dissent from the merger
transaction involving Holding and Whitney, and receives cash in exchange
for his shares of Holding common stock, will be treated as receiving such
payment (other than any amounts constituting interest, which will be
treated as ordinary income) in complete redemption of his shares of
Holding, provided such shareholder does not actually or constructively own
any Holding common stock after the exchange under the provisions and
limitations of Section 302.
h) No gain or loss will be recognized by Holding on the transfer of all of its
assets to Whitney solely in exchange for Whitney common stock and cash in
lieu of fractional shares which is subsequently distributed to Holding
common stockholders pursuant to the plan of reorganization (Section 361).
i) No gain or loss will be recognized by Xxxxxxx on the receipt by Xxxxxxx of
substantially all of the assets of Holding in exchange for Xxxxxxx xxxxx
(Section 1032(a)).
j) The tax basis of Holding's assets in the hands of Xxxxxxx will be the same
as the basis of those assets in the hands of Holding immediately prior to
the merger (Section 362(b)). The tax basis of Holding's assets in the
hands of Xxxxxxx will not be increased by any cash paid to dissenters or
cash paid in lieu of fractional shares.
k) The holding period of the assets of Holding in the hands of Xxxxxxx will
include the period during which such assets were held by Holding (Section
1223(2)).
Xx. Xxxxxxx X. Xxxxx
Xx. Xxxx X. Xxxxx
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l) The merger of Bank with and into WNB, as described above, will constitute a
reorganization under Section 368 of the Code (Section 368 (a)(1)(A)).
m) WNB and Bank will each be a "party to a reorganization" (Section 368 (b)).
n) No gain or loss will be recognized by Whitney or WNB on the merger of Bank
into WNB (Section 1032).
o) No gain or loss will be recognized by Bank on the transfer of all of its
assets to WNB pursuant to the plan of reorganization (Section 361).
p) The tax basis of Bank's assets in the hands of WNB will be the same as the
basis of those assets in the hands of Bank immediately prior to the
transaction (Section 362(b)).
q) The holding period of the assets of Bank in the hands of WNB will include
the period during which such assets were held by Bank (Section 1223(2)).
We express no opinion on the impact, if any, on any other sections of the Code,
including but not limited to Section 382, other than that as stated immediately
above, and neither this opinion nor any prior statements are intended to imply
or to be an opinion on any other matters.
In analyzing the authorities relevant to the potential tax issues outlined in
the opinion we have applied the standards of "substantial authority" and "more
likely than not the proper treatment," as used in Section 6662 under current
law. Based upon our analysis, we have concluded that there is substantial
authority for the indicated tax treatment of the transaction, and we also
believe the indicated tax treatment of the transaction is more likely than not
the proper treatment.
Very truly yours,
XXXXXX XXXXXXXX LLP
By
Xxxxxxx X. Xxxxxx, III
Copies to: Xxxxxx X. Xxxxxxxx, Xx., Esq.
Xxxxxxx X. Xxxxxx, Xx., Esq.
Xxxxxx X. Xxxxx, Esq.
Xxxx X. Xxxx, Esq.
Xxxxxxxxx X. Xxxxxx
