1. Which of the following is not a requirement under Code Section 355 in order to qualify a transaction as a divisive Type D reorganization? a. Shareholders must not sell their stock for at least five years after the transaction. b. There must be a substantial business purpose for the transaction. c. Both the transferor corporation and the controlled corporation must be engaged in an active trade or business after the distribution. d. 80 percent control must be transferred to the transferor’s shareholders.
2. Giant has preferred stock selling for 123.6 percent of par that pays a 11.4 percent annual coupon. What would be Giant's component cost of preferred stock?