Gnat Corporation and Catcher Corporation Would Like to Merge into One

question 1

Multiple Choice

Gnat Corporation and Catcher Corporation would like to merge into one company. Gnat has a net value of $700,000 and Catcher's net value is $300,000. They were considering creating a new corporation called GnatCatcher, but Catcher owns valuable patents that cannot be transferred. Therefore, Gnat will transfer all of its assets to Catcher in exchange for 70% of its stock. Gnat will then liquidate by exchanging the Catcher stock with its shareholders for their stock in Gnat. Which, if any, of the following statements is correct?

• A) This transaction qualifies as a "Type A" consolidation reorganization.
• B) This transaction qualifies as a "Type B" reorganization.
• C) This transaction qualifies as a "Type C" reorganization.
• D) This transaction does not qualify as a reorganization, because Gnat, the larger corporation, rather than Catcher, the smaller corporation, ceases to exist after the transaction.
• E) None of the above statements is correct.

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Definitions:

Wrongfully Attached

A legal term referring to property or assets that have been improperly seized or subjected to a lien due to incorrect legal judgments or clerical errors.

Actual Damages

Compensation awarded to a plaintiff in a lawsuit for the direct and quantifiable losses suffered, such as medical expenses or lost earnings.

Writ Of Execution

is a court order that authorizes the seizure of assets from a debtor to satisfy a judgment.

Foreclosure Order

A legal directive which authorizes the sale of collateral upon borrowers' failure to pay back a loan.