In the last few years, corporate mergers and acquisitions have witnessed explosive growth.  Although more recent market conditions have appeared to restrain the latest merger movement, scholars and commentators have used the rise in merger activity to reevaluate the preferential tax treatment granted to those mergers and acquisitions that fall under the U.S. tax law’s definition of a corporate “reorganization.”  Under the current Internal Revenue Code, neither shareholders nor corporations recognize gain or loss on the exchange of stock or securities in transactions that qualify as a “corporate reorganization.”  The significance of this tax rule raises a central question: why does this tax preference exist?  Since its statutory inception in 1919, numerous scholars have debated the theoretical justifications for this tax law.  Few, however, have sought to move beyond intellectual and conceptual origins to address the more pertinent question of institutional development: how and why has this tax benefit become a deeply entrenched part of American corporate tax law?         
    This Article mainly addresses this second question.  It contends that historically constituted political and economic interests have gradually transformed this law from its beginnings as a limited statutory exception into a modern version of voluntary corporate welfare.  This transformation can be explained less by resort to timeless economic logic or legal doctrine than by reference to the institutional dynamics and the concrete economic, political, and social conditions that have existed during crucial moments in the incremental expansion and maintenance of this tax provision.
    In narrating the early phases of this gradual transformation, this Article has two interrelated objectives.  First, it seeks to historicize the pre-history, the statutory origins, and the early liberalization of this corporate tax law.  Second, this article highlights the sequential and contingent development of the reorganization provisions.  In examining the historical processes that led to the early expansion and entrenchment of this tax law, this Article illustrates the contested and provisional nature of the creation, expansion, and maintenance of this corporate tax benefit.  This Article mainly investigates two pivotal periods—the 1920s when this rule was gradually liberalized, and the early 1930s when this tax law faced near elimination—to underscore how material context and historical sequence determined the possibilities of legal change.