The continuity of interest and the continuity of business requirements prevent transactions that appear to be a sale from qualifying for tax-free treatment of a reorganization.

Question

Quizplus · Accepted Answer

The continuity of interest and the continuity of business requirements are two tests that must be met for a transaction to qualify for tax-free treatment under a reorganization. These tests help ensure that the reorganization is not a disguised sale, but rather a true reorganization of the business. If these tests are not met, the transaction will not qualify for tax-free treatment.

The Continuity of Interest and the Continuity of Business Requirements