Continuity Of Business Enterprise Doctrine


Continuity Of Business Enterprise Doctrine
A taxation principle applicable to corporate mergers and acquisitions. The doctrine holds that, in order to qualify as a tax-free reorganization, the acquiring entity must either continue the target company's historic business or should use a substantial portion of the target's business assets in a business.

The continuity of business enterprise doctrine applies only to the business and business assets of the target company, and not to the acquiring company. Therefore, in a situation where most of the assets of a company are sought to be disposed of, one way of ensuring compliance with the continuity doctrine is by making this company the acquirer rather than the target. This is a technique that has been approved by the IRS.


Investment dictionary. . 2012.


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