Determine whether taxable and if not taxable, what type of reorg applies:A Corp owns assets valued at $400,000 and liabilities of $100,000. B Corp transfers $160,000 of its voting stock and $40,000 in cash for 75% of A’s assets and all of its liabilities. A distributes the remaining assets and the B stock to its shareholders and then liquidates.
A Corp acquires 200,000 shares of B Corp 10 years ago. In the current year, A exchanges 40% of its stock for 500,000 of the remaining 600,000 shares of B stock. After the transaction, A owns 700,000 of B’s 800,000 outstanding shares.
A Corp owns assets valued at $1 million and liabilities of $450,000. B transfers $500,000 of its voting stock and $50,000 cash for all of A’s assets. B assumes A’s liabilities. A distributes the B stock and cash to its shareholders and liquidates.
B Corp holds assets valued at $850,000 and liabilities of $50,000. A Corp transfers $790,000 of voting stock and $10,000 non-voting for all of B’s common and preferred. B becomes a subsidiary of A.
A owns assets valued at $600,000 and liabilities of $150,000. B exchanges $270,000 of its voting stock and investment worth $180,000 for all of A’s assets and liabilities. A distributes the B stock to its shareholders for 60% of their stock and retains the investments.
Brown Corp was organized in 2005 by Red Corp (55%), Blue Corp (35%), and Yellow Corp (10%). Brown has been successful and has assets worth $12 million (basis is $4.4 million) with liabilities of $2 million. Red would like to acquire a controlling interest in Brown using a Type B reorg. Blue is willing to get out but Yellow does not want to hold Red stock.Can Red accomplish a Type B reorg of Brown? Explain how it does/does not meet the requirements and draw a diagram of the reorg (before and after).
Big Corp acquired a 25% interest in Small Corp 2 years ago by exchanging $375,000 of its preferred stock with A, one of Small’s shareholders. Big tried to acquire the assets of Small but was denied by the Small Board of Directors. In the current year, Big acquires $712,500 of Small’s voting common and $200,000 of preferred shares. Big now owns 95% of the Small common and 100% of preferred. What are the tax issues with respect to this transaction as it