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 their Somali stock. 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) "Type D" reorganization.
E) A taxable exchange.

Question

Quizplus · Accepted Answer

The exchange qualifies as a "Type A" reorganization because Manx Corporation transferred 40% of its stock to Somali Corporation, which is considered a "controlling interest."

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