By Olivia Erika Susa
Every so often, corporations undertake business restructuring with varying business objectives in mind. It could be to optimize or streamline business operations, to expand to other industries, or to form strategic alliances with other corporations. In most cases, these would involve the transfer or exchange of significant property or shares, the taxes related to which become a material consideration to the parties involved.
To this end, Section 40(C)(2) of the Tax Code provides relief to taxpayers undertaking mergers, consolidations, or transfers of property to controlled corporations in exchange for shares. Specifically, the Tax Code states that no gains or losses may be recognized on such exchanges, or what is commonly referred to as tax-free exchanges (TFE).