Purchasers' Ability to Preserve Tax Attributes in Context of ' 363 Sales

Due to the value associated with tax attributes and the likelihood of abusive transactions designed to transfer such tax attributes to otherwise profitable companies, the Tax Code contains certain mechanisms designed to preclude such “trading in” and “transferring of” tax attributes. To protect the value of tax attributes in bankruptcy, it is necessary to understand the limitations imposed by the Tax Code on the calculation of the value of the tax attributes in and out of the bankruptcy context.

Of particular import is Tax Code Section 382, which imposes a limitation on the use of “pre-change” NOLs if there is an “ownership change” at the loss corporation. An “ownership change” occurs if: 1) the percentage of the stock of the loss corporation owned by one or more “5-percent shareholders” has increased by more than 50 percentage points; over 2) the lowest percentage of stock of the loss corporation (or any predecessor corporation) owned by such shareholders at any time during the three-year period ended on the date of the owner shift. The term “5 percent shareholder” is a term of art specifically defined in the Tax Code (see Tax Code Section 382(k)(7); Treas. Reg. Section 1.382-2T(g)(1)). The three-year testing period can be reduced in certain circumstances such as a previous ownership change or where all losses arise after the three-year period begins.

Outside of the bankruptcy context, the amount of pre-change NOLs that can be used in the tax years following an ownership change are subject to an annual limitation calculated by multiplying the value of the company immediately before the ownership change by the long-term tax-exempt rate (the “Section 382 Limitation”). However, in the bankruptcy context, if the ownership change occurs pursuant to a Chapter 11 plan of reorganization, a special valuation rule generally applies which permits the value of the company to be measured after the reorganization is consummated (see Tax Code Section 382(l)(6)). This special valuation rule reflects the principle that the value of the company for purposes of calculating the Section 382 Limitation shall reflect the increase (if any) in value of the company resulting from any surrender or cancellation of creditors' claims in the reorganization. However, even in light of the special valuation rule set forth in Tax Code Section 382(l)(6), the value of a debtor's NOLs is often significantly impaired by the Section 382 Limitation in the bankruptcy context.

Given the Section 382 Limitation's potential impairment of the value of a debtor's NOLs, debtors and potential holders of a reorganized debtor's stock may seek to avoid a transaction or structure that triggers the Section 382 Limitation. The consummation of a plan of reorganization in accordance with Tax Code Section 382(l)(5) is one manner of avoiding a Section 382 Limitation, and thus, preserves the value of NOLs. Plans of reorganization that rely on Tax Code Section 382(l)(5) are often referred to as “L5″ plans.

Under Tax Code Section 382(l)(5), a company is not subject to the Section 382 Limitation in the event that the persons or entities who owned the debtor's stock immediately before the relevant ownership change and/or “qualified creditors” emerge from the reorganization owning at least 50% of the total value and voting power of the debtor's stock immediately after the ownership change. Only the stock that is received on account of being a shareholder or a qualified creditor immediately before the ownership change will count toward satisfying the 50% requirement (Tax Code Section 382(l)(5)(A)(ii)).

For purposes of Tax Code Section 382(l)(5), a “qualified creditor” includes: 1) a creditor that has held the debt for at least 18 months prior to the petition date of the bankruptcy (“old and cold” creditors); or 2) a creditor holding debt that arose in the ordinary course of the corporation's trade or business (e.g., a trade creditor). Creditors receiving less than 5% of the reorganized company equity are deemed to be “old and cold.” Treasury Regulations state that debt arises in the “ordinary course of the loss corporation's trade or business” if it is: trade debt; a tax liability; a liability arising from a past or present employment relationship, a past or present business relationship with a supplier, customer, or competitor of the loss corporation, a tort, a breach of warranty, or a breach of statutory duty; or indebtedness incurred to pay an expense deductible under Tax Code Section 162 or included in the cost of goods sold (see Treas. Reg. Section 1.382-9(d)).

In addition to satisfying the objective and mechanical requirements of Tax Code Section 382(l)(5) briefly described above, the Internal Revenue Service (“IRS”) requires that the reorganized company carry on more than an insignificant amount of active trade or business during and subsequent to the bankruptcy case. While there is an exception to the Section 382 rules that generally require the continuation of a historic business by the reorganized company, the IRS employs a standard under Tax Code Section 269 to impose the active trade or business requirement (see Tax Code Section 269). There is little guidance on what constitutes “more than an insignificant amount of active trade or business” under Tax Code Section 269.

As a trade-off for this favorable tax treatment, if an L5 plan is effectuated, there will be a one-time adjustment to the NOLs and tax credits – i.e., the NOLs and tax credits will be determined as if no deduction was allowed for interest paid or accrued during the three years preceding the change year and during the pre-change portion of the change year. Further, if a second ownership change occurs within two years of the reorganization, the reorganized company will effectively be prevented from utilizing any pre-reorganization NOLs.

In addition to the rules discussed above, it is important to recognize that the Tax Code includes additional, more complex rules addressing built-in gains and losses that can impact the Section 382 Limitation.

Primer on ' 363 Sales

In certain circumstances, it may be advisable for a debtor to sell a portion or substantially all of its assets in a sale under Bankruptcy Code ' 363 (a “Section 363 sale”). This process typically involves the negotiation of an asset purchase agreement with an initial bidder (i.e., the “stalking horse”) followed by a bidding and auction process in which the “highest and best” offer is accepted as the winning bid. Thereafter, the bankruptcy court must approve the winning bidder's asset purchase agreement as a condition precedent to consummation of the transaction.

Debtors often utilize ' 363 sales when the business lacks sufficient funds necessary to maintain ongoing operations and a sale of the debtor's assets is necessary to maximize the return to the creditors. Potential purchasers favor ' 363 sales because such sales permit the purchaser to cherry-pick favorable assets while leaving other less valuable or detrimental assets behind. Further, the ' 363 sale ensures that the purchaser receives the purchased assets free and clear of any liens and encumbrances. However, ' 363 sales typically fail to utilize the full value of the debtor's tax attributes and thereby leave value on the table, often to the detriment of the debtor's creditors and shareholders.

Section 363 sales are unlikely to fully utilize the debtor's tax attributes for two reasons: 1) the tax attributes do not transfer to the purchaser and are not available to offset any future income generated by the purchased assets; and 2) the sale of the debtor's assets often generates a loss (as opposed to a gain) so there is little, if any gain, for the tax attributes to offset.

On the other hand, an L5 plan may preserve the value of the tax attributes. Moreover, where the cash necessary to keep the debtor operating is lacking, qualified creditors have combined the cash-generating ability of ' 363 sales with the value-maximizing ability of L5 plans to structure reorganizations that maximize the creditor's investment (specifically the plan sponsor's investment) and also provide the bankruptcy estate with a guaranteed return. While the value of the debtor increases by structuring an L5 plan that preserves the tax attributes, designing and implementing such a plan requires careful planning and thoughtful tax analysis.

Mechanics of Alternative Transactions

As identified above, a ' 363 sale can provide the bankruptcy estate with cash to satisfy creditors' claims or, alternatively, provide cash sufficient to maintain the debtor's operations and/or reorganize a different business division. Recently, ' 363 sales have been used in conjunction with L5 plans to: 1) provide a cash infusion to the debtor; 2) preserve the tax attributes; and 3) cause higher cash bids to be made at a ' 363 auction. The cash bids at auction by potential sponsors are higher than other bids because the potential sponsors are valuing the tax attributes (which may be retained if an alternative L5 plan is effectuated).

To accomplish these objectives, the debtor commences a typical ' 363 sale where substantially all of the assets are included in a negotiated asset purchase agreement (“APA”) with a stalking-horse bidder. The stalking-horse bidder may or may not be the potential plan sponsor. The pre-negotiated APA is subject to auction procedures and approval by the bankruptcy court before the sale is effective. As part of the auction procedures, a potential L5 plan sponsor (i.e., a qualified creditor or shareholder) (the “Potential Sponsor”) bids cash for the assets. However, the Potential Sponsor's bid is contingent on the Potential Sponsor's inability to consummate a plan of reorganization that is more beneficial to the creditors and the estate. If the Potential Sponsor has the highest and best bid, the Potential Sponsor infuses cash into the estate in accordance with its APA and, thereafter, seeks to have an L5 plan approved whereby the cash infusion made under the APA is used to fund the plan. Upon consummation of the plan, the Potential Sponsor emerges as the majority (or greater) equity owner of the reorganized debtor.

It is essential that the winning bid and underlying APA contain the appropriate safeguards highlighting the contingent nature of the asset sale to avoid any finding that the execution of the APA constituted a complete transaction for tax purposes and effectuated the asset sale. Such safeguards include, among other things, 1) the inclusion of Court approval as a condition precedent to closing on the asset sale to highlight the “incomplete” nature of the transaction; 2) the requirement of execution of the APA and consummation of the L5 plan to occur within the same tax year to preserve the tax doctrine of rescission; and 3) the exclusion certain of the debtor's assets from the APA so the excluded assets would be sufficient to allow the debtor to satisfy the continuity of business requirements of the Tax Code.

When May This Work?

The L5 plan structure can provide the certainty of cash-for-assets sale and preserve the value of a debtor's tax attributes. However, this alternative is available only in limited circumstances. Generally, the Potential Sponsor must be a “qualified creditor” under Tax Code Section 382 and have a claim that is large enough to warrant at least 50% of the reorganized company's equity upon emergence. Given this requirement, the Potential Sponsor may seek to acquire at least 80% of the reorganized company if the Potential Sponsor is interested in reorganized company being included in the Potential Sponsor's consolidated group for federal income tax purposes. If the reorganized company is included in the Potential Sponsor's consolidated group for federal income tax purposes, the separate return limitation year rules set forth in Treas. Reg. Section 1.1502-1(f) (the “SRLY rules”) would apply to generally only allow the reorganized company's NOLs to offset income generated by the reorganized company and not the other members of the consolidated group. Accordingly, even if the L5 plan is successful and the tax attributes are preserved, the Potential Sponsor must generate income at the reorganized debtor level to utilize the preserved tax attributes. While companies may structure transactions to minimize the limitations imposed by the SRLY rules such transactions require careful tax planning and advice.

In addition, the cash infusion that the Potential Sponsor makes under the APA must not cause the Potential Sponsor to receive less than 50% of the reorganized debtor on account of its claims. As discussed earlier, only stock received on account of the Potential Sponsor's claims will count towards satisfying the Tax Code Section 382(l)(5) 50% threshold.

Conclusion

Potential Sponsors and cash-strapped debtors may benefit from exploring an L5 plan in connection with a ' 363 sale. In such circumstances, careful and considered legal advice is essential. Specifically, counsel must determine whether: 1) a Potential Sponsor will have a large enough claim to recover greater than 50% of the reorganized debtor (and in most cases more than 80%); 2) the Potential Sponsor is willing to fund out-of-pocket and contribute some cash to the debtor; 3) the amount of cash necessary to keep the debtor afloat causes the Potential Sponsor to receive less than 50% of the reorganized debtor “on account of its claim”; and 4) the Potential Sponsor has a vision and business plan to make the reorganized debtor profitable. In the right circumstances, an L5 plan can be a successful bankruptcy tool to preserve valuable tax attributes that are otherwise lost in a typical ' 363 sale.

Sunni P. Beville is a partner in Brown Rudnick's Bankruptcy & Corporate Restructuring Group. She represents official and ad hoc committees of creditors and equity holders in brokerage firm insolvency cases, Chapter 11 bankruptcy cases and out-of-court restructuring matters. Ms. Beville can be reached at [email protected]. Vincent J. Guglielmotti is an associate in Brown Rudnick's Tax Group. He can be reached [email protected]. The above article is for informational purposes only and was not intended or written to be tax or legal advice. Each reader must exercise professional judgment or involve a professional to provide such judgment regarding the issues and information contained in the article. The information contained in the article is not intended and cannot be used to avoid potential tax penalties.

This article addresses a growing trend in bankruptcy sales whereby purchasers decline to effectuate an asset purchase under Bankruptcy Code ' 363, and instead, acquire the debtor's stock by sponsoring a reorganization plan designed to preserve valuable tax attributes. Generally, as an alternative to effectuating an asset purchase under Bankruptcy Code ' 363, a reorganization plan permits certain qualified creditors to acquire the stock in a reorganized debtor in exchange for satisfaction of their prepetition claims and an additional cash infusion. The alternative reorganization plan enables the reorganized debtor to avoid a limitation on the ability to use previously generated net operating losses (“NOLs”) under Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”), and, thereby, preserve the debtor's previously generated NOLs which may offset future taxable income. The transaction structure typically includes a winning cash bid for a contingent sale of substantially all of the assets by a qualified creditor. The contingent asset sale is effectuated only in the event the qualified creditor is unable to sponsor a reorganization plan under which the qualified creditor acquires a majority of the common stock of the reorganized debtor. The transaction combines the certainty of a Bankruptcy Code ' 363 “cash for assets sale” with the potential for increased recovery due to the additional value associated with the preservation of NOLs (in the event the contingent asset sale is not consummated and the alternative plan of reorganization is approved).

Brief Primer on Net Operating Losses and Tax Code Section 382

A distressed or bankrupt company will typically have significant NOLs. These NOLs can generally be carried forward for 20 years to offset future taxable income. In addition to NOLs, the company may also have certain tax credits (e.g., research and development credits or investment tax credits). Tax credits can also generally be carried forward for 20 years to offset future tax liabilities on a dollar-for-dollar basis. Tax credits and NOLs are often referred to collectively as “tax attributes.” The ability to offset future taxable income or to decrease future tax liabilities on a dollar-for-dollar basis reduces a company's exposure to future taxation and, accordingly, is a valuable asset.

Due to the value associated with tax attributes and the likelihood of abusive transactions designed to transfer such tax attributes to otherwise profitable companies, the Tax Code contains certain mechanisms designed to preclude such “trading in” and “transferring of” tax attributes. To protect the value of tax attributes in bankruptcy, it is necessary to understand the limitations imposed by the Tax Code on the calculation of the value of the tax attributes in and out of the bankruptcy context.

Of particular import is Tax Code Section 382, which imposes a limitation on the use of “pre-change” NOLs if there is an “ownership change” at the loss corporation. An “ownership change” occurs if: 1) the percentage of the stock of the loss corporation owned by one or more “5-percent shareholders” has increased by more than 50 percentage points; over 2) the lowest percentage of stock of the loss corporation (or any predecessor corporation) owned by such shareholders at any time during the three-year period ended on the date of the owner shift. The term “5 percent shareholder” is a term of art specifically defined in the Tax Code (see Tax Code Section 382(k)(7); Treas. Reg. Section 1.382-2T(g)(1)). The three-year testing period can be reduced in certain circumstances such as a previous ownership change or where all losses arise after the three-year period begins.

Outside of the bankruptcy context, the amount of pre-change NOLs that can be used in the tax years following an ownership change are subject to an annual limitation calculated by multiplying the value of the company immediately before the ownership change by the long-term tax-exempt rate (the “Section 382 Limitation”). However, in the bankruptcy context, if the ownership change occurs pursuant to a Chapter 11 plan of reorganization, a special valuation rule generally applies which permits the value of the company to be measured after the reorganization is consummated (see Tax Code Section 382(l)(6)). This special valuation rule reflects the principle that the value of the company for purposes of calculating the Section 382 Limitation shall reflect the increase (if any) in value of the company resulting from any surrender or cancellation of creditors' claims in the reorganization. However, even in light of the special valuation rule set forth in Tax Code Section 382(l)(6), the value of a debtor's NOLs is often significantly impaired by the Section 382 Limitation in the bankruptcy context.

Given the Section 382 Limitation's potential impairment of the value of a debtor's NOLs, debtors and potential holders of a reorganized debtor's stock may seek to avoid a transaction or structure that triggers the Section 382 Limitation. The consummation of a plan of reorganization in accordance with Tax Code Section 382(l)(5) is one manner of avoiding a Section 382 Limitation, and thus, preserves the value of NOLs. Plans of reorganization that rely on Tax Code Section 382(l)(5) are often referred to as “L5″ plans.

Under Tax Code Section 382(l)(5), a company is not subject to the Section 382 Limitation in the event that the persons or entities who owned the debtor's stock immediately before the relevant ownership change and/or “qualified creditors” emerge from the reorganization owning at least 50% of the total value and voting power of the debtor's stock immediately after the ownership change. Only the stock that is received on account of being a shareholder or a qualified creditor immediately before the ownership change will count toward satisfying the 50% requirement (Tax Code Section 382(l)(5)(A)(ii)).

For purposes of Tax Code Section 382(l)(5), a “qualified creditor” includes: 1) a creditor that has held the debt for at least 18 months prior to the petition date of the bankruptcy (“old and cold” creditors); or 2) a creditor holding debt that arose in the ordinary course of the corporation's trade or business (e.g., a trade creditor). Creditors receiving less than 5% of the reorganized company equity are deemed to be “old and cold.” Treasury Regulations state that debt arises in the “ordinary course of the loss corporation's trade or business” if it is: trade debt; a tax liability; a liability arising from a past or present employment relationship, a past or present business relationship with a supplier, customer, or competitor of the loss corporation, a tort, a breach of warranty, or a breach of statutory duty; or indebtedness incurred to pay an expense deductible under Tax Code Section 162 or included in the cost of goods sold (see Treas. Reg. Section 1.382-9(d)).

In addition to satisfying the objective and mechanical requirements of Tax Code Section 382(l)(5) briefly described above, the Internal Revenue Service (“IRS”) requires that the reorganized company carry on more than an insignificant amount of active trade or business during and subsequent to the bankruptcy case. While there is an exception to the Section 382 rules that generally require the continuation of a historic business by the reorganized company, the IRS employs a standard under Tax Code Section 269 to impose the active trade or business requirement (see Tax Code Section 269). There is little guidance on what constitutes “more than an insignificant amount of active trade or business” under Tax Code Section 269.

As a trade-off for this favorable tax treatment, if an L5 plan is effectuated, there will be a one-time adjustment to the NOLs and tax credits – i.e., the NOLs and tax credits will be determined as if no deduction was allowed for interest paid or accrued during the three years preceding the change year and during the pre-change portion of the change year. Further, if a second ownership change occurs within two years of the reorganization, the reorganized company will effectively be prevented from utilizing any pre-reorganization NOLs.

In addition to the rules discussed above, it is important to recognize that the Tax Code includes additional, more complex rules addressing built-in gains and losses that can impact the Section 382 Limitation.

Primer on ' 363 Sales

In certain circumstances, it may be advisable for a debtor to sell a portion or substantially all of its assets in a sale under Bankruptcy Code ' 363 (a “Section 363 sale”). This process typically involves the negotiation of an asset purchase agreement with an initial bidder (i.e., the “stalking horse”) followed by a bidding and auction process in which the “highest and best” offer is accepted as the winning bid. Thereafter, the bankruptcy court must approve the winning bidder's asset purchase agreement as a condition precedent to consummation of the transaction.

Debtors often utilize ' 363 sales when the business lacks sufficient funds necessary to maintain ongoing operations and a sale of the debtor's assets is necessary to maximize the return to the creditors. Potential purchasers favor ' 363 sales because such sales permit the purchaser to cherry-pick favorable assets while leaving other less valuable or detrimental assets behind. Further, the ' 363 sale ensures that the purchaser receives the purchased assets free and clear of any liens and encumbrances. However, ' 363 sales typically fail to utilize the full value of the debtor's tax attributes and thereby leave value on the table, often to the detriment of the debtor's creditors and shareholders.

Section 363 sales are unlikely to fully utilize the debtor's tax attributes for two reasons: 1) the tax attributes do not transfer to the purchaser and are not available to offset any future income generated by the purchased assets; and 2) the sale of the debtor's assets often generates a loss (as opposed to a gain) so there is little, if any gain, for the tax attributes to offset.

On the other hand, an L5 plan may preserve the value of the tax attributes. Moreover, where the cash necessary to keep the debtor operating is lacking, qualified creditors have combined the cash-generating ability of ' 363 sales with the value-maximizing ability of L5 plans to structure reorganizations that maximize the creditor's investment (specifically the plan sponsor's investment) and also provide the bankruptcy estate with a guaranteed return. While the value of the debtor increases by structuring an L5 plan that preserves the tax attributes, designing and implementing such a plan requires careful planning and thoughtful tax analysis.

Mechanics of Alternative Transactions

As identified above, a ' 363 sale can provide the bankruptcy estate with cash to satisfy creditors' claims or, alternatively, provide cash sufficient to maintain the debtor's operations and/or reorganize a different business division. Recently, ' 363 sales have been used in conjunction with L5 plans to: 1) provide a cash infusion to the debtor; 2) preserve the tax attributes; and 3) cause higher cash bids to be made at a ' 363 auction. The cash bids at auction by potential sponsors are higher than other bids because the potential sponsors are valuing the tax attributes (which may be retained if an alternative L5 plan is effectuated).

To accomplish these objectives, the debtor commences a typical ' 363 sale where substantially all of the assets are included in a negotiated asset purchase agreement (“APA”) with a stalking-horse bidder. The stalking-horse bidder may or may not be the potential plan sponsor. The pre-negotiated APA is subject to auction procedures and approval by the bankruptcy court before the sale is effective. As part of the auction procedures, a potential L5 plan sponsor (i.e., a qualified creditor or shareholder) (the “Potential Sponsor”) bids cash for the assets. However, the Potential Sponsor's bid is contingent on the Potential Sponsor's inability to consummate a plan of reorganization that is more beneficial to the creditors and the estate. If the Potential Sponsor has the highest and best bid, the Potential Sponsor infuses cash into the estate in accordance with its APA and, thereafter, seeks to have an L5 plan approved whereby the cash infusion made under the APA is used to fund the plan. Upon consummation of the plan, the Potential Sponsor emerges as the majority (or greater) equity owner of the reorganized debtor.

It is essential that the winning bid and underlying APA contain the appropriate safeguards highlighting the contingent nature of the asset sale to avoid any finding that the execution of the APA constituted a complete transaction for tax purposes and effectuated the asset sale. Such safeguards include, among other things, 1) the inclusion of Court approval as a condition precedent to closing on the asset sale to highlight the “incomplete” nature of the transaction; 2) the requirement of execution of the APA and consummation of the L5 plan to occur within the same tax year to preserve the tax doctrine of rescission; and 3) the exclusion certain of the debtor's assets from the APA so the excluded assets would be sufficient to allow the debtor to satisfy the continuity of business requirements of the Tax Code.

When May This Work?

The L5 plan structure can provide the certainty of cash-for-assets sale and preserve the value of a debtor's tax attributes. However, this alternative is available only in limited circumstances. Generally, the Potential Sponsor must be a “qualified creditor” under Tax Code Section 382 and have a claim that is large enough to warrant at least 50% of the reorganized company's equity upon emergence. Given this requirement, the Potential Sponsor may seek to acquire at least 80% of the reorganized company if the Potential Sponsor is interested in reorganized company being included in the Potential Sponsor's consolidated group for federal income tax purposes. If the reorganized company is included in the Potential Sponsor's consolidated group for federal income tax purposes, the separate return limitation year rules set forth in Treas. Reg. Section 1.1502-1(f) (the “SRLY rules”) would apply to generally only allow the reorganized company's NOLs to offset income generated by the reorganized company and not the other members of the consolidated group. Accordingly, even if the L5 plan is successful and the tax attributes are preserved, the Potential Sponsor must generate income at the reorganized debtor level to utilize the preserved tax attributes. While companies may structure transactions to minimize the limitations imposed by the SRLY rules such transactions require careful tax planning and advice.

In addition, the cash infusion that the Potential Sponsor makes under the APA must not cause the Potential Sponsor to receive less than 50% of the reorganized debtor on account of its claims. As discussed earlier, only stock received on account of the Potential Sponsor's claims will count towards satisfying the Tax Code Section 382(l)(5) 50% threshold.

Conclusion

Potential Sponsors and cash-strapped debtors may benefit from exploring an L5 plan in connection with a ' 363 sale. In such circumstances, careful and considered legal advice is essential. Specifically, counsel must determine whether: 1) a Potential Sponsor will have a large enough claim to recover greater than 50% of the reorganized debtor (and in most cases more than 80%); 2) the Potential Sponsor is willing to fund out-of-pocket and contribute some cash to the debtor; 3) the amount of cash necessary to keep the debtor afloat causes the Potential Sponsor to receive less than 50% of the reorganized debtor “on account of its claim”; and 4) the Potential Sponsor has a vision and business plan to make the reorganized debtor profitable. In the right circumstances, an L5 plan can be a successful bankruptcy tool to preserve valuable tax attributes that are otherwise lost in a typical ' 363 sale.

Sunni P. Beville is a partner in Brown Rudnick's Bankruptcy & Corporate Restructuring Group. She represents official and ad hoc committees of creditors and equity holders in brokerage firm insolvency cases, Chapter 11 bankruptcy cases and out-of-court restructuring matters. Ms. Beville can be reached at [email protected]. Vincent J. Guglielmotti is an associate in Brown Rudnick's Tax Group. He can be reached [email protected]. The above article is for informational purposes only and was not intended or written to be tax or legal advice. Each reader must exercise professional judgment or involve a professional to provide such judgment regarding the issues and information contained in the article. The information contained in the article is not intended and cannot be used to avoid potential tax penalties.