Burmese Corporation Is Interested in Acquiring Javanese Corporation by Transferring

question 29

Multiple Choice

Burmese Corporation is interested in acquiring Javanese Corporation by transferring 30% of its stock for all of Javanese's assets valued at $500,000 (basis of $150,000) and its $200,000 of liabilities. Javanese has created $50,000 in general business research credits which it cannot use. Javanese concentrates on pharmaceutical research whereas Burmese manufactures sun glasses. Burmese uses a discount factor of 8% and the Federal applicable rate is 4%. Javanese will terminate after the restructuring. How will this transaction be treated for tax purposes?

• A)Since Javanese has liabilities in excess of its basis, this excess will be taxable to Javanese.
• B)The most that Burmese can use of the general business credits in any year is $4,200.
• C)This transaction could qualify as a "Type A" or a "Type C" reorganization.
• D)All of the above.
• E)None of the above.

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Definitions:

Profitability

The degree to which a business or activity yields profit or financial gain, often expressed as a percentage of revenue.

Internal-Based Strategies

Strategies focused on leveraging a company's internal strengths and resources to achieve business objectives.

Market Share

The share of the market's total sales volume that is held by a specific brand, product, or company.