Manx Corporation transfers 40% of its stock and $50,000 in cash to Somali Corporation for $500,000 of assets and all $200,000 of its liabilities. Somali exchanges the Manx stock, cash, and its remaining $100,000 of assets with its shareholders for all of their stock in Somali. After the exchange, Somali liquidates. The exchange qualifies as what type of transaction?
A) "Type A" reorganization.
B) "Type B" reorganization.
C) "Type C" reorganization.
D) Acquisitive "Type D" reorganization.
E) A taxable exchange.

Question

Quizplus · Accepted Answer

A "Type A" reorganization is a statutory merger or consolidation. In this case, Manx Corporation transferred 40% of its stock and $50,000 in cash to Somali Corporation for $500,000 of assets and all $200,000 of its liabilities. This is a statutory merger, so it is a "Type A" reorganization.

Manx Corporation Transfers 40% of Its Stock and $50,000 in Cash