Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation. Immediately after the incorporation, Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock. Motor Corporation is liquidated. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The IRS may view the series of transactions as an integrated event and apply the step transaction doctrine, potentially denying tax-free reorganization treatment. This is because the transactions may not meet the continuity of interest or business enterprise tests required for a tax-free reorganization, such as a Type C reorganization, where the acquiring corporation must usually acquire substantially all of the assets of the target corporation in exchange for voting stock.

Roger Transfers Assets from His Sole Proprietorship to His 100%-Owned