Quasi-reorganization
Steps:
- Revalue assets, liabilites to FMV, (gain, loss recognized).
- Paid-in-capital available or created. If none exists shares must be donated, par reduced, etc.
- Deficit is charged against paid-in-capital and eliminated.
- Retained earnings is dated (to show when the quasi-reorganization happened) for ten years; and for three years the amount of the eliminated deficit must disclosed.
Requirements:
- Approved by shareholders.
- Use objective FMV for revaluations of assets and liabilities.
- Retained earnings ending balance = $0.
- Retained earnings dated as above.