ABA Tax Section Seeks Guidance on Inversion Rules and Bankruptcies

August 31, 2022

Hon. Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Re: Recommendations for further guidance under Treas. Reg. § 1.7874-2(i)(2) concerning bankrupt and insolvent companies

Dear Commissioner Rettig:

Enclosed are comments expanding on earlier recommendations identifying the need for guidance under Treas. Reg. § 1.7874-2(i)(2) concerning bankrupt and insolvent companies. These comments are submitted on behalf of the Section of Taxation and have not been reviewed or approved by the House of Delegates or the Board of Governors of the American Bar Association. Accordingly, they should not be construed as representing the position of the American Bar Association.

The Section of Taxation would be pleased to discuss these comments with you or your staff.

Sincerely,

C. Wells Hall, III
Chair, Section of Taxation

Enclosure

cc:
Hon. Lily Batchelder, Assistant Secretary (Tax Policy), Department of the Treasury
Jose Murillo, Deputy Assistant Secretary International Affairs, Department of the Treasury
Thomas West, Deputy Assistant Secretary (Tax Policy), Department of the Treasury
Lindsay M. Kitzinger, Acting International Tax Counsel, Office of International Tax Counsel, Department of Treasury
Krishna P. Vallabhaneni, Tax Legislative Counsel, Department of the Treasury
Brenda Zent, Tax Specialist, Office of International Tax Counsel, Department of the Treasury
James S. Wang, Attorney-Advisor, Office of International Tax Counsel, Department of the Treasury
William M. Paul, Principal Deputy Chief Counsel and Deputy Chief Counsel (Technical), Internal Revenue Service
Peter Blessing, Associate Chief Counsel (International), Internal Revenue Service
Daniel M. McCall, Deputy Associate Chief Counsel (International), Internal Revenue Service
John J. Merrick, Special Counsel, Office of Associate Chief Counsel (International), Internal Revenue Service
Laura Williams, Branch Chief, Office of the Associate Chief Counsel (International), Internal Revenue Service
Robert Wellen, Associate Chief Counsel (Corporate), Internal Revenue Service
Marie Milnes-Vasquez, Special Counsel, Office of the Associate Chief Counsel (Corporate), Internal Revenue Service

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AMERICAN BAR ASSOCIATION
SECTION OF TAXATION

Comments Concerning the Creditor Inversion Rules of Section 7874

These comments (“Comments”) are submitted on behalf of the American Bar Association Section of Taxation (the “Section”) and have not been reviewed or approved by the House of Delegates or Board of Governors of the American Bar Association. Accordingly, they should not be construed as representing the position of the American Bar Association.

Principal responsibility for preparing these comments was exercised by Devon Bodoh and Graham Magill. Significant contributions were made by John Bates, Amie Colwell Breslow, Mark Hoffenberg, Anthony Sexton, and Andrew Simmons. These Comments have been reviewed by Amie Colwell Breslow, Chair of the Foreign Activities of U.S. Taxpayers Committee, Edward Tanenbaum of the Committee on Government Submissions, and Lisa Zarlenga, Vice-Chair for Government Relations for the Tax Section.

Although members of the Section may have clients who might be affected by the federal tax principles addressed by these Comments, no member who has been engaged by a client (or who is a member of a firm or other organization that has been engaged by a client) to make a government submission with respect to, or otherwise to influence the development or outcome of one or more specific issues addressed by, these Comments has participated in the preparation of the portion (or portions) of these Comments addressing those issues. Additionally, although the Section's diverse membership includes government officials, no such official was involved in any part of the drafting or review of these Comments.

Contacts:
Devon Bodoh
202 682 7060
Devon.Bodoh@weil.com

Date:
August 31, 2022

I. INTRODUCTION

On June 3, 2022, the Section submitted a comment letter in response to Notice 2022-21 ¹ identifying and prioritizing tax issues that the Department of Treasury and Internal Revenue Service should address through regulations or other published guidance in 2022-2023 (“Recommendations Letter”). Identified in the Recommendation Letter as high priority is a guidance project that adjusts the application of the inversion rules applicable to creditors in bankrupt and insolvent companies pursuant to Treas. Reg. § 1.7874-2(i)(2). These Comments provide further elaboration on our prior proposal and are submitted to advance that recommendation.

II. EXECUTIVE SUMMARY

Section 7874² treats a foreign corporation as a U.S. corporation to the extent the foreign corporation, among other things, acquires a domestic corporation and the former shareholders of the domestic corporation own at least 80% of the stock of the acquiring corporation “by reason of holding” stock in the domestic corporation. If the former shareholders of the domestic corporation own at least 60% (but less than 80%) of the foreign corporation stock, the foreign corporation is still treated as a foreign corporation, but is subject to certain adverse tax consequences, such as recognizing inversion gains. Whether section 7874 and the consequences thereof apply, depends on the level of continued ownership by the former domestic corporation shareholders. As a result, this calculation is critical and has spawned a number of regulation packages with complex rules to determine the quantum of foreign corporation stock former domestic corporation shareholders are considered to own “by reason of holding stock” in the domestic corporation.³

Two regulatory provisions in particular have heightened importance in the context of Title 11 of the United States Code (“Bankruptcy Code”) or similar case, i.e., bankruptcy case or insolvent restructuring/debt workout. Generally, creditors of a U.S. corporation in certain circumstances are treated as shareholders of the domestic corporation while any foreign corporation stock received by a creditor of a non-U.S. entity in satisfaction of their claim is disregarded.⁴ These rules, especially when operating in tandem, can have the effect of treating an inversion as occurring whenever creditors of a U.S. subsidiary in a foreign-parented group receive stock of the foreign parent in satisfaction of their claims against the U.S. subsidiary. This result may occur regardless of the relative value of the U.S. subsidiary creditor claims and whether the domestic corporation is already foreign-parented. This is a plainly inappropriate result that can significantly complicate, and potentially undermine, debt workouts that should not be subject to the inversion rules from a policy perspective.

In the current environment of rising interest rates and pessimistic economic outlook, bankruptcy filings and out-of-court debt workouts are expected to increase in frequency in the near future. It is not unusual for non-U.S. corporations, along with their U.S. subsidiaries, to file for chapter 11 of the Bankruptcy Code protection in U.S. bankruptcy court — indeed, this practice has significantly increased in recent years and compared to prior periods of broad-based market distress. Consequently, section 7874, once again, is expected to imminently present obstacles to an efficient restructuring of a foreign-parented group's debt.

To prevent technical section 7874 inversions that do not run afoul of the policy of section 7874, we make the following recommendations:

III. DISCUSSION

A. Background

1. Section 7874 and Inversions Generally

Section 7874 is a punitive provision designed to protect the U.S. tax base from corporate expatriation or inversion transactions. The consequences of section 7874 range from the imposition of a minimum tax (which may or may not be applicable) and the ineligibility of foreign corporation dividends from treatment as qualifying dividend income (“QDI”), to the treatment of the foreign corporation as a U.S. corporation for all U.S. tax purposes.

An inversion is a transaction pursuant to which a U.S. corporation (a “Domestic Entity”)⁵ is acquired by a non-U.S. corporation (a “Foreign Acquiring Corporation”) and, consequently, expatriates. Section 7874, however, does not apply to every acquisition of a Domestic Entity by a foreign corporation. In order for section 7874 to apply, the former shareholders of the Domestic Entity must exceed a level of indirect ownership of the Domestic Entity through their ownership of Foreign Acquiring Corporation. In this case, such Domestic Entity will be treated as an expatriated entity (an “Expatriated Entity”).⁶ Specifically, an inversion for purposes of section 7874 occurs when the following three requirements are met:

When former Domestic Entity shareholders own at least 60% but less than 80% of Foreign Acquiring Corporation stock by reason of holding stock in the Domestic Entity (a “60 Percent Inversion”), the Foreign Acquiring Corporation is treated as a surrogate foreign corporation (a “Surrogate Foreign Corporation”).¹⁰ In this case, the Expatriated Entity, its owners, and certain other related parties must recognize the full amount of “inversion gain” in the ten years following the inversion transaction. Inversion gain is income or gain recognized from transfers of stock or other properties by the Domestic Entity and any income from licensed property of the Domestic Entity incurred (i) as part of the Domestic Entity acquisition or (ii) after such acquisition if the transfer or license is to a foreign related person. Inversion gain may not be a factor in certain 60 Percent Inversions or may be managed with additional tax planning. In addition, among other things, future dividend distributions by the Foreign Acquiring Corporation are not considered QDI.¹¹ The lack of QDI can cause marketability issues with respect to Foreign Acquiring Corporation stock.

When former Domestic Entity shareholders own 80% or more of the Foreign Acquiring Corporation stock “by reason of” holding stock in the Domestic Entity (an “80 Percent Inversion”), the Foreign Acquiring Corporation is treated as a U.S. corporation for all U.S. tax purposes. Classification as a U.S. corporation is permanent. As a result, the Foreign Acquiring Corporation is subject to tax in the United States as well as, most likely, its jurisdiction of incorporation or management and control.

Determining the amount of stock the former Domestic Entity shareholders receive by reason of holding stock in the Domestic Entity (the “Ownership Fraction”)¹² is critical to application of section 7874. Regulations under section 7874 provide numerous rules governing the types of interests treated as stock, stock that is not treated as stock, and the value of such stock, all of which feeds into the Ownership Fraction. The rules relating to certain creditor claims, found in Treas. Reg. § 1.7874-2(i)(2)(i), and disqualified stock, found in Treas. Reg. § 1.7874-4, have significant implications in Title 11 or similar cases and insolvent restructurings. As discussed in more detail below, these provisions can result in transactions that are not otherwise inversions being subject to section 7874.

2. Relevant Section 7874 Regulations

a. The Creditor Rule

Treas. Reg. § 1.7874-2 provides a variety of rules to determine whether a foreign corporation is a Surrogate Foreign Corporation. Among them is Treas. Reg. § 1.7874-2(i)(2)(i), which treats creditors of a Domestic Entity as shareholders of the Domestic Entity in certain circumstances (the “Creditor Rule”). Under the Creditor Rule, each creditor of the Domestic Entity is treated as a shareholder of the Domestic Entity and any claim of such creditor is treated as stock of the Domestic Entity if “immediately prior to the first date properties are acquired as part of a [Domestic Entity Acquisition],” the Domestic Entity is in a Title 11 or similar case (as defined in section 368(a)(3)) or insolvent.¹³ The creditor is treated as a shareholder for all purposes of section 7874.¹⁴ Consequently, any stock of the Foreign Acquiring Corporation received in satisfaction of a claim against the Domestic Entity is included in the Ownership Fraction.

Example 19 in Treas. Reg. § 1.7874-2(k)(2) illustrates the application of the Creditor Rule. In Example 19, DC1, the Domestic Entity, is insolvent; pursuant to a plan, newly-formed FA, the Foreign Acquiring Corporation, acquires all of the assets of DC1, the stock of DC1 is cancelled, and the creditors of DC1 receive all of the FA stock in exchange for their claims against DC1. The Creditor Rule applies to treat the creditors of DC1 as the former shareholders of DC1. As a result, FA would be treated as a U.S. corporation.

The Creditor Rule was promulgated in response to the concern that taxpayers were taking the position that Domestic Entity creditors who received Foreign Acquiring Corporation stock in satisfaction of their claims against a Domestic Entity were not former shareholders of the Domestic Entity; therefore, lacking the requisite continuity of interest, the Foreign Acquiring Corporation could not be a Surrogate Foreign Corporation. ¹⁵ Citing Alabama Asphaltic ¹⁶ and Treas. Reg. § 1.368-1(e)(6), the Creditor Rule reflects the view that “the creditors, in substance, are the equity owners of the domestic corporation at the time of the title 11 or similar case.”¹⁷

b. Disqualified Stock Rules

Under the disqualified stock rules of Treas. Reg. § 1.7874-4, certain shares of Foreign Acquiring Corporation stock are disregarded in determining the Ownership Fraction. Specifically, disqualified stock includes stock exchanged for “nonqualified property” or stock exchanged for property with “associated obligations” to the extent it increases the fair market value of the assets of the Foreign Acquiring Corporation.¹⁸ The disqualified stock rules are targeted at transactions that inappropriately increase the denominator in the Ownership Fraction by either increasing the value of the assets of the Foreign Acquiring Corporation or decreasing the amount of its liabilities.¹⁹ The disqualified stock rules typically result in former Domestic Entity owners treated as owning a higher percentage of the Foreign Acquiring Corporation stock, making an inversion more likely. Foreign Acquiring Corporation stock transferred, directly or indirectly, in satisfaction of creditor claims can constitute disqualified stock.

A third party obligation owed by a member of the EAG constitutes a category of “nonqualified property.”²⁰ Stock of the Foreign Acquiring Corporation transferred in exchange for or satisfaction of such an obligation (that is related to the Domestic Entity Acquisition) is thus treated as disqualified stock. In addition, Foreign Acquiring Corporation stock that is exchanged for property with associated obligations describes a situation in which the stock is transferred from one person to another person in exchange for property and the transferee transfers, as part of the same plan, the stock in satisfaction of, or in exchange for the assumption of, one or more obligations of the transferee or a person related to the transferee (the “Associated Obligation Rule” and collectively, with nonqualified property, the “Creditor Disqualified Stock Rules”).²¹

The purpose of the Associated Obligation Rule is to create parity between perceived economically equivalent transactions. A Foreign Acquiring Corporation could assume all of the liabilities of a Domestic Entity and then issue stock for cash to repay the liabilities. The stock issued for cash would be disqualified stock.²² The same economic result can be achieved if instead the Foreign Acquiring Corporation did not assume any liabilities and the Domestic Entity transferred a portion of the Foreign Acquiring Corporation stock to its creditors in satisfaction of the liabilities.²³

The definition of “obligation” is expansive: an obligation is any fixed or contingent obligation to make a payment or provide value without regard to whether the obligation is otherwise taken into account for purposes of the Code.²⁴ An obligation, however, does not include any obligation treated as stock for purposes of section 7874. Consequently, obligations do not include creditor claims against the Domestic Entity treated as stock under the Creditor Rule.

As described further below, the Creditor Disqualified Stock Rules, in conjunction with the Creditor Rule, can, and does, result in a 100% Ownership Fraction when the stock or assets of a Domestic Entity are transferred as part of a restructuring and creditors receive 100% of the stock of the reorganized company in satisfaction of their claims.²⁵

Indeed, there can be a 100% ownership fraction when (i) the U.S. entity was already foreign-parented; (ii) 100% of the stock or assets continue to be directly or indirectly held by the same foreign parent (or a replacement foreign parent put into place to facilitate goals that are entirely unrelated to the inversion rules); and (iii) creditors of domestic entities receive even a single share of stock. This kind of result is plainly inappropriate.

B. Comments

1. The Creditor Rule Should be Clarified to Confirm that a Domestic Entity Acquisition is a Predicate to Application of the Rule.

The Creditor Rule treats creditors of the Domestic Entity as shareholders of the Domestic Entity “if immediately prior to the first date properties are acquired as part of a domestic entity acquisition,” the Domestic Entity is in a Title 11 or similar case or insolvent.²⁶ The plain language of the Creditor Rule, then, requires a Domestic Entity Acquisition before the creditors of the Domestic Entity can be treated as shareholders of the Domestic Entity. Some ambiguity has been expressed, however, on what constitutes a Domestic Entity Acquisition in this context.

For example, assume Foreign Parent (“FP”) owns a U.S. subsidiary (“USS”) and a foreign subsidiary (“FS”). FP and USS are either in a Title 11 or similar case or insolvent. In a restructuring-in-place, the stock of FP is canceled, and the creditors of FP and USS receive 40% and 60% of the stock of FP, respectively, in satisfaction of their claims against FP and USS.²⁷

A restructuring-in-place, which is common, does not involve the formation of new entities or transfer of the debtor's assets; some or all of the outstanding debt is simply converted to equity. In these cases, because a Foreign Acquiring Corporation does not directly or indirectly acquire substantially all of the properties of the Domestic Entity, a Domestic Entity Acquisition should not occur as such acquisition does not meet the definition of Domestic Entity Acquisition.²⁸ Thus, in the example above, the Creditor Rule would not apply and FP would not be treated as a Surrogate Foreign Corporation.

It is also possible to consider the receipt of FP stock by the USS creditors as the Domestic Entity Acquisition. This interpretation of the Creditor Rule essentially requires that the creditors of the Domestic Entity be treated as the shareholders of the Domestic Entity as soon as the Domestic Entity is in a Title 11 or similar case or insolvent. That is, the Creditor Rule must be applied to treat FP as no longer owning 100% of the stock of USS in order to find a Domestic Entity Acquisition. Under this interpretation, the USS creditors' receipt of FP stock, then, is treated as a transfer by the USS creditors of all of the stock of USS to FP in exchange for FP stock, which is an indirect acquisition of substantially all of the properties of USS by FP. Consequently, a Domestic Entity Acquisition has occurred and the application of the Creditor Rule results in (at least) a 60 Percent Inversion.

The latter view is a strained interpretation of the Creditor Rule and inconsistent with its plain language and other analogous areas of law. Domestic Entity Acquisition is defined for all purposes of the section 7874 regulations, unless otherwise provided.²⁹ The Creditor Rule does not provide for a different definition of Domestic Entity Acquisition; therefore, the Creditor Rule should be interpreted to require an actual direct or indirect acquisition of the properties of the Domestic Entity by a Foreign Acquiring Corporation. It is, then, only immediately prior to an actual Domestic Entity Acquisition that Domestic Entity creditors can be treated as shareholders of the Domestic Entity. This is also consistent with Example 19, which involved the transfer by DC1 of all of its assets to FA, and the purpose of the Creditor Rule: to prevent easy circumvention of section 7874 through bankruptcy or insolvency. In a restructuring-in-place, the ownership of a U.S. subsidiary does not change, it continues to be foreign-parented.

Moreover, treating the receipt of Foreign Acquiring Corporation stock by the Domestic Entity creditors as the Domestic Entity Acquisition is inconsistent with analogous areas of law, including the authority on which the Creditor Rule is based. The historic shareholders of an insolvent corporation or corporation in a Title 11 or similar case remain the shareholders of the corporation unless and until their stock is canceled. For example, a member of a consolidated group does not deconsolidate as the result of a bankruptcy filing — the subsidiary remains a member unless and until its stock ownership is actually changed such that the ownership requirements of section 1504 are no longer considered.³⁰ As another example, a section 382 ownership change resulting from creditors' receipt of stock does not occur until stock is actually issued in satisfaction of creditor claims upon the effective date of a chapter 11 plan or actual issuance in an out - of-court restructuring.³¹ In these situations, the creditors are no less “in substance” the equity owners of the corporation. And, importantly, the section 368 continuity-of-interest regulations can treat a target creditor's claim as a proprietary interest in the target corporation if the target corporation is in a Title 11 or similar case for the limited purpose of measuring continuity of interest in a potential reorganization (the “Creditor COI Regulations”).³²

The Creditor Rule has its basis in Alabama Asphaltic as do the Creditor COI Regulations. The potential reorganization referenced in the Creditor COI Regulations is a transfer by the target corporation of some or all of its assets to another corporation in exchange for stock and the distribution of such stock by the target corporation to its shareholders.³³ The Creditor COI Regulations treat a target creditor as a historic target shareholder for purposes of determining whether the transfer of assets by the target qualifies as a non-taxable reorganization, which depends in part on the amount of acquiring stock the shareholders and/or creditors receive. That is, the continued indirect ownership of the historic target shareholders is relevant to determine the tax treatment of a corporate acquisition. This is precisely the same as section 7874: the continued indirect ownership of the historic Domestic Entity (i.e., target) shareholders is relevant to determine the tax treatment of a corporate acquisition.

Therefore, the Creditor Rule should be interpreted no differently. Just as a potential reorganization, i.e., a transfer by the target corporation of its assets to the acquiring corporation, is a predicate to the Creditor COI Regulations, a “potential” Domestic Entity Acquisition, i.e., a transfer by the Domestic Entity of its assets (or the stock of the Domestic Entity by its legal shareholders) to the Foreign Acquiring Corporation, should be a predicate to the Creditor Rule.

2. Safe Harbor to Prevent the Application of Section 7874 to Foreign-Parented Domestic Entities

The combination of the Creditor Rule and Creditor Disqualified Stock Rules can lead to particularly absurd results and potentially subject a number of transactions to the consequences of section 7874 that are quite simply not inversions in a traditional sense. These fact patterns all entail a Domestic Entity that is foreign-parented prior to the Title 11 or similar case or insolvency and remains foreign-parented after the restructuring. In these cases, the foreign parent may be required, for local country corporate law purposes, to transfer its assets, which can include the stock of a U.S. subsidiary, to a newly formed foreign corporation to effectuate the restructuring transaction. In such a case, a Domestic Entity Acquisition has occurred.

For example, assume FP owns FS and USS. FP and USS are both in a Title 11 or similar case. FP transfers the stock of USS and FS, i.e., all of its assets, to Foreign Acquiring Corporation in exchange for all of the stock of Foreign Acquiring Corporation. FP transfers 95% of the Foreign Acquiring Corporation stock to its creditors and the remaining five percent to creditors of USS (on behalf of USS) in cancellation of their respective claims.³⁴

The transfer of the stock of USS to Foreign Acquiring Corporation is a Domestic Entity Acquisition. The Creditor Rule applies to treat the creditors of USS as shareholders of USS such that they are treated as owning five percent of Foreign Acquiring Stock by reason of holding stock in USS. The Creditor Disqualified Stock Rules, however, disregard all of the stock of Foreign Acquiring Corporation the creditors of FP received because FP transferred, as part of the same plan, Foreign Acquiring Corporation stock received in exchange for property to its creditors in satisfaction of FP obligations. Consequently, the Ownership Fraction is 100% and Foreign Acquiring Corporation is treated as a U.S. corporation.

This result occurs under the section 7874 regulations even though this result would not occur outside of a Title 11 or similar case or insolvency ³⁵ and is not supported by the policy of section 7874. Section 7874 is designed to prevent or impede a Domestic Entity from becoming foreign-parented without a meaningful reduction in the historic ownership of the Domestic Entity. In these situations, the Domestic Entity is foreign-parented and remains foreign-parented. There is no abuse or erosion of the U.S. tax base to prevent. Moreover, the corporate legal steps can be dictated by the corporate law of the jurisdiction of incorporation of FP even if FP is in a Title 11 case. Many non-U.S. jurisdictions do not have the equivalent of a restructuring-in-place and/or the formation of a new entity is needed to address local country corporate or insolvency concerns. In other words, these transactions are not U.S. tax motivated and do not present the same concerns that were the impetus for the Creditor Rule or disqualified stock rules.

Similarly, although the disqualified stock rules are largely mechanical in their application, excluding stock received by non-Domestic Entity creditors from the Ownership Fraction while including stock received by Domestic Entity creditors does not lead to a more accurate Ownership Fraction; it creates distortion. Relatively small creditor claims, if they happen to be at the Domestic Entity level, can lead to an 80 Percent Inversion when the purpose of the transaction is to restructure the entire group's debt. Given the lack of U.S. tax avoidance, however, the amount of Foreign Acquiring Corporation stock the Domestic Entity creditors receive should be irrelevant.

Consequently, we recommend the introduction of a safe harbor that prevents the application of section 7874 when the Domestic Entity (i) is in a Title 11 or similar case or insolvent, (ii) was foreign-parented prior to the Domestic Entity Acquisition, and (iii) is foreign-parented immediately after the Domestic Entity Acquisition.

3. Modification of the Creditor Disqualified Stock Rule

The Creditor Disqualified Stock Rule should be modified in the context of Title 11 or similar cases or insolvency. Stock received by third-party creditors of foreign entities that are also in a Title 11 or similar case or insolvency should not be disregarded in calculating the Ownership Fraction. The underlying principles of treating creditors of a domestic entity as shareholders applies equally to creditors of foreign entities; therefore, a consistent approach should be applied to all creditors. If Alabama Asphaltic principles are being applied to treat the creditors of a U.S. entity as owners of the enterprise for inversion purposes, creditors of foreign entities should be similarly treated.

As discussed above, the inversion rules are not intended to apply to all situations in which a Domestic Entity becomes foreign-parented. Instead, the inversion rules are intended to apply when a Domestic Entity becomes foreign-parented and shareholders of the Domestic Entity retain too much stock in the combined business. When a Foreign Acquiring Corporation and a Domestic Entity enter into a business combination and the shareholders of the Foreign Acquiring Corporation receive more than 40% of the stock of the combined enterprise (determined in accordance with all of the rules that are relevant to deriving the Ownership Percentage), there is no inversion, despite the group now being foreign-parented. When Alabama Asphaltic is being employed to treat creditors of the Domestic Entity as the shareholders of that entity, it should properly be viewed as treating creditors of the foreign entities in the enterprise as shareholders as well. If the enterprise is then “combined” — rather than the creditors of the constituent parts of the enterprise taking their constituent assets — that is economically similar to the more typical healthy company Foreign Acquiring Corporation/Domestic Entity combination and can be tested accordingly under section 7874.