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?

Question

Quizplus · Accepted Answer

The exchange qualifies as a "Type A" reorganization because Manx Corporation transferred 40% of its stock to Somali Corporation in exchange for assets and liabilities, and Somali Corporation exchanged its stock, cash, and remaining assets with its shareholders for all of their stock in Somali.

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