Question

Sky corp. is a manufacturing corporation. The cash generated by the manufacturing business is invested in to the real estate development. Sky corp. wants to reduce the risk in the real estate business and thinks of incorporating a 100% owned new subsidiary and transfer all real estate business under the new sub. This transaction qualifies as what type of reorganization? Please explain your answer

a)      Type A b)      Type B c)      Type C d)      Type D

Answer 1

In the given case, Sky corp is indulged into manufacturing business. But they have invested in real estate and now transferring all the real estate into a new company. It is a Type B reorganization.

Type A: Mergers and Consolidations – A statutory merger or acquisition depends on one partnership procuring another's advantages.

Type B: Acquisition (Target Corporation Subsidiary) – A Type B redesign includes one partnership procuring another's stock, which at that point turns into an auxiliary of the securing organization. While the exchange might be made exclusively to procure casting a ballot stock, it can likewise be one of a few exchanges that make up a bigger arrangement for obtaining control. An acquisition completed in this type of revamping happens in a brief timeframe, for example, inside a year.

Type C: Acquisition (Target Corporation Liquidation) – Target companies are required to sell in Type C acquisition, except if necessities are deferred by the IRS. Any investors that have a stake in the organization will likewise have a stake in the getting organization. Redesign arrangements concern charge outcomes, not liquidation rules.

Type D: Transfer – Type D exchanges are a type of corporate rebuilding which can incorporate both corporate split-offs or spi