Which of the following statements best describes the requirement that must be met in a tax-deferred Type B stock-for-stock reorganization?
A)The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target shareholders.
B)The acquiring corporation must hold substantially all of the target's properties after the acquisition.
C)The target corporation shareholders must receive "solely" voting stock in the acquiring corporation in the exchange.
D)The target corporation shareholders must receive voting stock in the acquiring corporation in exchange for 60 percent or more of the target corporation stock.

Question

Quizplus · Accepted Answer

In a tax-deferred Type B stock-for-stock reorganization, the target corporation shareholders must receive "solely" voting stock in the acquiring corporation in the exchange. This means that the consideration for the exchange must consist only of voting stock and cannot include any cash or other property. The 40 percent continuity of interest test and the requirement for the acquiring corporation to hold substantially all of the target's properties after the acquisition are requirements for other types of reorganizations (Type A and Type C, respectively). The requirement for the target corporation shareholders to receive voting stock in the acquiring corporation in exchange for 60 percent or more of the target corporation stock is not a specific requirement for a Type B reorganization.

Which of the Following Statements Best Describes the Requirement That