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Additional clarification of what constitutes a tax-exempt "reorganization" should be helpful both to the Department and taxpayers.  Previous rulings have held that an Internal Revenue Code Sec. 351 (stock for assets) transaction is an exempt reorganization; however, some more recent rulings seem to suggest that stock must be exchanged in order to have a valid IRC Sec. 351 transfer. This appears to reflect a misunderstanding of federal rules as there can be a valid 351 transaction federally without an actual transfer of stock, for instance in situations where the transferor already owns 100% of the stock of the transferee.  The key would appear to be that the transaction is a valid 351 transfer for federal income tax purposes, in which case it should be an exempt occasional sale for Virginia purposes.

In addition, there are other types of federal nonrecognition transactions similar to IRC Sec. 351 which should also constitute occasional sales for Virginia purposes.  Additional discussion of those provisions in the revised regulation would also be helpful.