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Problem 20-35 Reorganization Gain, Loss, and...




Problem 20-35 Reorganization Gain, Loss, and Basis Determination (LO. 3) Target Corporation holds assets with a fair market value of $4,000,000 (adjusted basis of $2,200,000) and liabilities of $1,500,000. It transfers assets worth $3,700,000 to Acquiring Corporation in a "Type C" reorganization, in exchange for Acquiring voting stock and the assumption of $1,400,000 of Target's liabilities. Target retained a building worth $300,000 (adjusted basis of $225,000). Target distributes the Acquiring voting stock and the building with an associated $100,000 mortgage to Wei, its sole shareholder, for all of her stock in Target. Wei's basis in her stock is $2,600,000. If an amount is zero, enter "0". a. Explain whether this transaction meets the requirements for a "Type C" reorganization. , this transaction the qualifications of a "Type C" reorganization. Solely voting stock of Acquiring is in the reorganization; thus the liabilities considered boot. At least 90% of the net fair market value of the Target assets and 70% of the gross value are transferred to Acquiring. In a "Type C", the acquiring can choose which liabilities to assume. b. The value of stock transferred from Acquiring to Target is $. c. Wei has a realized of $ of which $ is recognized. Acquiring has in the amount of $ and Target has in the amount of $ on the reorganization. d. Wei's basis in the building is $ and has a $ liability she acquired.


Paper#7685 | Written in 18-Jul-2015

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