T Co. has 100 shares of voting stock outstanding. T Co. has operating asset worth $900 and nonoperating assets worth $300. T Co. also has debts totaling $200. Assume T Co. merges (under state law) into P Co. with P Co. transferring $500 fair market value of P’s five-year notes and $500 fair market value of P’s voting common stock.
How will the acquisition of T Co. be characterized for tax purposes?
Could the acquisition of T Co. be structured as a merger into a P Co. subsidiary?