X, an S corporation, owns 100 percent of the stock of Y, a corporation for which a QSub election is in effect. X merges into Y under state law, causing the QSub election for Y to terminate, and Y survives the merger.
The formation of the new corporation, Y, and the merger of X into Y can qualify as a reorganization described in section 368(a)(1)(F) if the transaction otherwise satisfies the requirements of that section.
An F reorganization is a mere change in identity, form, or place of organization of one corporation, so the surviving entity is treated as a continuation of the original S corporation.
X, the S corporation, merges into its QSub Y under state law, and Y survives the merger.
Because the merger collapses the parent into the subsidiary, the QSub election for Y terminates.
The combined steps can qualify as a reorganization described in section 368(a)(1)(F) if the requirements of that section are met.
An F reorganization treats the surviving corporation as a continuation of the original, preserving its tax attributes.
