Xian Corporation and Win Corporation Would Like to Combine into One

question 27

Multiple Choice

Xian Corporation and Win Corporation would like to combine into one entity. Win redeems 90% of its common stock and all of its nonvoting preferred stock in exchange for 40% of Xian's common and 20% of its nonvoting preferred stock. Win then distributes the Xian stock to its shareholders. Win then becomes a subsidiary of Xian.

• A) This is a taxable transaction.
• B) This restructuring qualifies as a divisive "Type D" reorganization.
• C) This restructuring qualifies as a "Type B" reorganization.
• D) This restructuring qualifies as a "Type E" reorganization.
• E) This restructuring qualifies as a "Type C" reorganization.

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Definitions:

Department of Agriculture

A government department responsible for developing and executing federal policies on farming, agriculture, forestry, and food, aiming to meet the needs of farmers and ensure food safety.

Official Poverty Line

The officially established income level that distinguishes the poor from the nonpoor. It is set at three times the cost of the Department of Agriculture’s minimum food budget.

After-Tax Income

Before-tax income minus taxes paid.

Before-Tax Income

Market income plus transfers.