Continuity of Interest Concept

Continuity of Interest Concept means:
a judicial doctrine used to distinguish a non- taxable reorganization exchange from a sale. A nontaxable reorganization is merely a readjustment of continuing interest in property under modified corporate form (i.e., a merger or a consolidation). The test is met if there is a continuity of the business entity under a modified format and there is a continuity of interest of the persons who owned the company before the reorganization. Generally, an equity (rather than debt) interest is necessary for a continuity of interest on the part of the transferor in the properties transferred. Reg. §1.368-l(b) and Former Revenue Ruling (check if this Rev. Rul. interpretation is current) 66-224, 1966-2 C.B. 114.