Section 31 Types of Recapitalizations and Collateral Issues

• Library: Bus Trans 2005

As indicated in §2.30 above, recapitalizations include the exchange of:

• preferred stock for common stock
• common stock for preferred stock
• common stock for other common stock
• bonds for stock
• stock for bonds; and
• bonds for bonds.

Under the Taxpayer Relief Act of 1997 (1997 Tax Act), Pub. L. No. 105-134, 111 Stat. 788, certain types of preferred stock will now be treated as taxable “boot.” See §2.32, infra.

When securities are issued in a recapitalization, consideration must be given to the original...