Corporation was successor employer for wage purposes

In a corporate reorganization, a shared service corporation qualified as a successor employer of two subsidiary corporations for purposes of the annual wage limitations under Code Secs. 3121(a)(1) and 3306(b)(1). The successor corporation met the three tests for the wages paid by a predecessor to an employee to be treated, for purposes of the annual wage limitation, as having been paid to that employee by a successor.

The successor corporation met the first test as it acquired substantially all the assets used in an essential operation of a trade or business of the subsidiary corporations. The second requirement was also met as the parent corporation represented that the subsidiary corporations’ employees were the common law employees in the trade or business immediately prior to the acquisition and would be common law employees in the successor corporation trade or business after the acquisition. Finally, the third requirement was also met because of the date of the acquisition, and wages were paid during the calendar year in which the acquisition occurred and prior to the acquisition. (LTR Report Number 2004, March 24, 2016.)

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