Reorganizing into one corporation


Salsa Corporation and Onion Corporation are interested in reorganizing into one corporation. Salsa has assets valued at $800000 (basis of $500000) and liabilities of $250000. Onions assets are valued at $500,000 (basis of $350000) and liabilities of $150000. Onion has been involved in an accounting scandal and both corporation feel that Onion's name has been tarnished. Further, 15% of Onions shareholders are so upset about the scandal and proposed reorganization that they are insisting their shares be bought out with cash. Onion unfortunately does not have the cash reserves to do this. Salsa, however, can step in and provide the liquid assets to complete the buyout. Given these facts, what type of reorganization would you suggest for Salsa and Onion?

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Accounting Basics: Reorganizing into one corporation
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