Acquisitive Reorganizations I. A. T Corporation is owned by four individuals A, B, C and D...

Acquisitive Reorganizations

I. A. T Corporation is owned by four individuals A, B, C and D and their respective adjusted basis in their T stock are $19,000, $87,000, $114,000 and $25,000. T’s assets consist of the following: Cash $20,000; Inventory $200,000 (AB $140,000); Land $180,000 (AB $210,000). Pursuant to the laws of the State of New York, T is merged into P Corporation pursuant to a plan whereby each shareholder of T is to receive $75,000 of P stock and $25,000 of cash. P is a publicly traded company whose assets, net of liabilities, are valued at $25 million. What are the tax consequences of this merger to T, T’s shareholders and P?

1. How would your answer to part A, above, change if each shareholder were to receive only $25,000 of P stock and $75,000 of cash?

2. How would your answer to part A, above, change if each shareholder, other than D, was to receive only P stock and D was to receive $100,000 of cash?

3. How would your answer to part A, above, change if each shareholder, other than D, were to receive $100,000 of cash and D was to receive only P stock?

Expert Solution

ekkarill92 answered 1 year ago

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