Solution-Explaining the benefits of using a Type A

Explaining the benefits of using a Type A consolidation

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Reference no: EM132646928

Problem - Drab Corporation just obtained exclusive rights to a new revolutionary fertilizer that is sure to be an instant success in the gardening industry. Unfortunately, Drab does not control the capital to market the product adequately. Therefore, it is considering joining forces with Olive, a corporation with substantial liquid assets and experience in marketing new products. This union, Drab believes, would give both corporations a competitive edge due to this product and the positive reputation each corporation has. Name recognition is so important in gardening marketing that Drab hates to lose this if it merges.

Drab's president, Lee Xanders, provides you with the following information and requests your guidance as to what type of reorganization Drab and Olive should consider.

Corporation	FMV of Assets	Adjusted Basis	Liabilities
Drab	$600,000	$480,000	$400,000
Olive	900,000	500,000	100,000

Required - Write a letter to Ms. Xanders explaining the benefits of using a "Type A" consolidation or a "Type C" merger. Drab's address is Route 1, Box 2440, Mason, OH 45040.

Reference no: EM132646928

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Explaining the benefits of using a Type A consolidation

Reference no: EM132646928

Reference no: EM132646928

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