FROM THE OFFICE OF PUBLIC AFFAIRS
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July 19, 2004
JS-1795
Treasury Issues Guidance on the Application of
Golden Parachute Rules in Bankruptcy
Today, the Treasury Department and the IRS issued guidance on application of the golden parachute rules to companies in bankruptcy. Revenue Ruling 2004-87 provides guidance for determining whether a change in ownership or control occurs when creditors acquire company stock in a bankruptcy reorganization.
The revenue ruling also provides guidance regarding how a company in a bankruptcy reorganization may satisfy the shareholder approval requirements for the small business corporation exception to the golden parachute rules. The ruling further addresses a situation in which a company that is a debtor in a bankruptcy reorganization will not be treated as having stock that is readily tradable on an established securities market, for purposes of the small business corporation exception, where the stock may be traded on an over-the-counter market.
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