Target shareholders recognize gain or loss when they receive assets (boot) as well as stock in the acquiring corporation in a transaction meeting the § 368 requirements.

Question

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In a transaction that meets the § 368 requirements (a type of reorganization under the Internal Revenue Code), target shareholders generally do not recognize gain or loss when they receive a combination of stock in the acquiring corporation and other property or cash (often referred to as "boot") unless the boot received is sufficient to trigger gain recognition. The primary focus is on the continuity of interest and the nature of the transaction rather than the receipt of boot per se.

Target Shareholders Recognize Gain or Loss When They Receive Assets