"Acquiring Corporation (A) has 50,000 shares of common stock outstanding (value -- $10 per share) and $500,000 of accumulated earnings and profits. Target Corporation (T) has assets with an aggregate adjusted basis of $300,000 and an aggregate FMV of $500,000 and $100,000 of accumulated earnings and profits. Except as otherwise noted, T has no liabilities. T?s ten equal shareholders each own 100 shares of T voting common stock with and adjusted basis of $20,000 and a FMV of $50,000. Discuss the tax consequences to A, T and T?s shareholders of each of the following alternative transactions: a. T merges into A in a qualified Type A Reorganization. Each T shareholder receives 4,000 shares of A voting common stock (value -- $40,000) and A nonvoting preferred stock (not ?unqualified preferred stock?) worth $10,000. b. Same as (a), above, but instead of the preferred stock each T shareholder receives 20-year market rate interest bearing A notes with a principal amount and fair market value of $10,000. c. Same as (b), above, except that two of the shareholders receive all the notes (with a principal amount and FMV of $100,000), and the remaining eight shareholders each receives voting common stock worth $50,000. d. Same as (b), above, except that T had $50,000 of accumulated earnings and profits. e. Assume that T has assets with an aggregate FMV of $600,000, an aggregate adjusted basis of $300,000, and a $100,000 liability. A acquires all of T assets in a qualified Type C reorganization in exchange for A voting stock worth $500,000 and A?s assumption of T?s $100,000 liability. T immediately distributes the A stock to its shareholders in complete liquidation. f. Same as (e), above, except that A transfers $500,000 of A voting stock and $100,000 cash to T, which uses the cash to pay off its liability and then distributes the stock to its shareholders in complete liquidation."
Paper#9358 | Written in 18-Jul-2015Price : $25