Butterfly Reorganization Calculator

Two shareholders splitting a business tax-deferred don't just need to split the total value evenly, they need every single category of asset split proportionately.

Reading This Tool

How To Use This Calculator

Enter each shareholder's ownership percentage, then how the assets are proposed to actually be split.

The proportionate distribution test looks at each type of property separately, cash, investments, real estate, operating assets, not the total. One shareholder taking all the real estate while the other takes all the cash fails the test even if the dollar totals are identical.

Your Inputs

Shareholder A's Ownership Percentage 50%

Total Cash & Equivalents $500,000

% Of Cash Proposed To Shareholder A 50%

Total Real Estate $1,500,000

% Of Real Estate Proposed To Shareholder A 80%

Total Operating Business Assets $2,000,000

% Of Operating Assets Proposed To Shareholder A 20%

A small tolerance is generally accepted in practice for genuine valuation uncertainty, but a proposed split like the default here, all the real estate to one side and all the operating assets to the other, is the classic pattern the proportionate distribution test is designed to catch.

Proportionate Distribution Test

Proposed Split vs. Ownership Percentage, By Asset Type

Shareholder A's Ownership % Proposed % To Shareholder A

A genuine butterfly reorganization involves a specific multi-step transfer sequence, generally through a new transferee corporation, and several other conditions beyond the proportionate distribution test alone. This checks one necessary condition, not the full qualification.

Splitting a business between shareholders?

Talk To Our Corporate Tax Team →