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

Question

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The continuity of interest and the continuity of business enterprise requirements are key components in determining whether a transaction qualifies for tax-free treatment as a reorganization. These requirements ensure that the transaction is not just a disguised sale, but rather a genuine reorganization of the businesses involved. As such, transactions that do not meet these requirements are not eligible for tax-free treatment.

The Continuity of Interest and the Continuity of Business Enterprise