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12 pages/β3300 words
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Subject:
Mathematics & Economics
Type:
Math Problem
Language:
English (U.S.)
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Topic:
Acquisitive Reorgs: Statutory Merger, Stock for Stock, and Stock for Asset
Math Problem Instructions:
Please study the content of module 6 and complete the questions in the document. The answers should be detailed and concise.
There are three problem sets in this Module. The first is concerned with Type A reorganizations, the next is concerned with Type C reorganizations. In both of these types of reorganizations the target goes out of existence and its assets are transferred to the acquiring corporation or a subsidiary of that corporation. The last problem set is concerned with Type B reorganizations (stock for stock). In a Type B reorganization the target remains in existence as a subsidiary of the acquiring corporation.
If you have any questions, please feel free to ask.
Math Problem Sample Content Preview:
Reorganizations
Student’s Name
Institutional Affiliation
Course
Instructor
Date
Reorganizations
In this evaluation, the concept of the reorganization of corporations in terms of Type A, B, and C will be explored, and solutions to questions 1-12 are presented below.
1
There are no tax consequences of this merger to Target Corporation since the boot (cash) is distributed to its shareholders. The table below shows the recognized gains for Target’s four shareholders.
Alice
Ben
Cathy
David
$
$
$
$
Acquiring Stock
750,000
750,000
750,000
750,000
Cash (Boot)
250,000
250,000
250,000
250,000
Adjusted Basis in Target Stock
390,000
870,000
1,190,000
660,000
Realized Gain/loss
610,000
130,000
- 190,000
340,000
Recognized Gain
250,000
130,000
-
250,000
The recognized gain for Alice, Ben, and David is $250,000, $130,000, and $250,000, respectively, being the lesser of the boot they received of $250,000 for each of their realized gains. Cathy had a realized loss of -$190,000, so she has no recognized gain. The gains are taxed as dividends to the extent of each Target shareholder’s share of Target’s E & P, which is 25% of E & P for each shareholder given that they own the corporation equally, the remaining (if any) is treated as a long-term capital gain.
2
There are no tax consequences of this merger to Target Corporation since the boot (cash) is distributed to its shareholders. The table below shows the recognized gains for Target’s four shareholders.
Alice
Ben
Cathy
David
$
$
$
$
Acquiring Stock
350,000
350,000
350,000
350,000
Cash
650,000
650,000
650,000
650,000
Adjusted Basis in Target Stock
390,000
660,000
1,190,000
870,000
Realized Gain/loss
610,000
340,000
- 190,000
130,000
Recognized Gain
610,000
340,000
-
130,000
The recognized gain for Alice, Ben, and David is $610,000, $340,000, and $130,000, respectively, being the lesser of the boot they received of $650,000 for each of their realized gains. Cathy had a realized loss of -$190,000, so she has no recognized gain. The gains are taxed as dividends to the extent of each Target shareholder’s share of Target’s E & P, which is 25% of E & P for each shareholder given that they own the corporation equally, the remaining (if any) is treated as a long-term capital gain.
3
Target’s stock that is acquired into Acquiring is valued at the value of Target’s assets, totaling $4 million and which consist of: Cash $200,000; Inventory $2,000,000 (AB $1,400,000); Land $1,800,000 (AB $2,100,000). If Target is merged into Acquiring pursuant to a plan whereby each shareholder of Target, other than David, is to receive the stock of Acquiring Corporation and...
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