Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

Question

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Continuity of interest is concerned with the amount of equity that the shareholders of the target corporation receive in a tax reorganization. This ensures that the transaction does not result in a taxable event for the shareholders, and that they have a continuing interest in the business after the reorganization.

Continuity of Interest as It Relates to a Tax Reorganization