Q:
Reorganization Gain, Loss, and Basis Determination
Target Corporation holds assets with a fair market value of liabilities of $1,500,000 and $4,000,000 adjusted basis of $2,200,000. It transfers assets worth $3,700,000 to Acquiring Corporation in a "Type C" reorganization, in exchange for Acquiring voting stock and the assumption of $1,400,000 of Target's liabilities.
Target retained a building worth $300,000 (adjusted basis of $225,000). Target distributes the Acquiring voting stock and the building with a related $100,000 mortgage to Wei, its sole shareholder, for all of her stock in Target. Wei's basis in her stock is $2,600,000.
If an amount is zero, enter "0".
a. Describe whether this transaction meets the requirements for a "Type C" reorganization, this transaction the qualifications of a "Type C" reorganization. Exclusively voting stock of Acquiring is in the reorganization; therefore the liabilities considered boot. At least 90 percent of the net fair market value of the Target assets and 70 percent of the gross value are transferred to Acquiring. In a "Type C", the acquiring will select which liabilities to assume.
b. The value of stock transferred from Acquiring to Target is $.
c. Wei has a realized of $ of which $ is recognized.
Acquiring has in the amount of $ and Target has in the amount of $ on the reorganization.
d. Wei's basis in the building is $ and has a $ liability she acquired.