The French Corporation has assets valued at $1 million with an adjusted basis of $700,000.There are mortgages of $250,000 associated with these assets.Accent Corporation acquires all of French's assets by exchanging $800,000 of its voting stock and assumes $200,000 of French's liabilities.French distributes the Accent stock and remaining liabilities to its shareholders in exchange for their French stock and then liquidates.Which,if any,of the following statements is correct?

Question

Quizplus · Accepted Answer

For a "Type C" reorganization,at least 80% of the net fair market value of French's assets must be acquired through voting stock.The net value of the assets is $750,000 ($1 million - $250,000)and 80% of this is $600,000.Thus,the transaction qualifies as a "Type C" reorganization.The restructuring cannot qualify as a "Type A" reorganization because not all of the liabilities were acquired by Accent.

The French Corporation Has Assets Valued at $1 Million with an Adjusted