Caesars' Plan to Form REIT Should Be Safe Bet

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Aug. 24 — Caesars Entertainment Corp. should be able to complete a tax-free spinoff of assets into a real estate investment trust as it seeks to reorganize its main operating subsidiary, the bankrupt Caesars Entertainment Operating Co., a practitioner said.

The deal will likely qualify as a reorganization under tax code Section 368(a)(1)(G), a provision that permits insolvent corporations to not recognize gain or loss in a reorganization, Robert Willens, an independent tax consultant in New York, told Bloomberg BNA Aug. 24. “As long as the transaction meets the continuity of interest requirement, which depends primarily on making sure the creditors who are junior to those who received REIT stock do not receive a lot of non-stock consideration,” he said.

Caesars has support from holders of its two most-senior slices of debt for the plan to turn the operating unit into a REIT. The subsidiary sought bankruptcy protection in January (12 DTR G-1, 1/20/15).