Reference no: EM132182768

Problems

In this transaction, the dissenter B must be taken into account in analyzing continuity of interest in the question. Refer to Regs. § 1.368-1(e). Is this transaction a good Type A reorganization? Why? Consider 70 percent continuity requirement. Does B have a complete redemption under Regs. 1.354-1(d), Ex. (3) and recognize his loss? Would the distribution of the appreciated property to B cause T to recognize a gain? If so, how much?

Considering 55 percent of the operating assets have been removed, would A and C recognize their realized gains? How about B? Would B recognize his loss?

By operation of law, assume T's liabilities, would P include any tax on § 311(b) or § 336(a) gain on distribution of assets to A and B? Would there be any gain on distribution of P stock to C? Why? Refer to § 1012 and § 1001.

Will P be concerned about this result? What does it happens if the reorganization fails?

What would you advise P to do to protect itself? Should P have a merger agreement in place? If so, what the merger agreement should include? For example, the merger agreement may include that at the time of the merger if the sum of the cash (or anything other than P stock) being paid to shareholders in "certain ways" exceeds 50 percent of the value of the T stock (here, $500), then P can elect to call off the merger. What are the "certain ways" of cash payments needed to list in the merger agreement for P to protect itself?

Attachment:- Problem References.rar