When a corporation is sold, sellers often wish to defer the taxable gain on a sale of shares. Under the US tax code, such gain deferral may be accomplished through a tax-free reorganization pursuant to IRC Sec. 368(a)(1).

Consider the common requirements (listed below) that each one of these reorganization types must meet to qualify for tax-free treatment.

Select one requirement and discuss how failure to meet the requirement may preclude qualifying for a tax-free reorganization.

Pursuant to plan of reorganization
Continuity of interest
Continuity of business enterprise
Business purpose test