Tree Corporation and Branch Corporation Would Like to Merge

question 105

Multiple Choice

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

• A)This transaction qualifies as a reverse "Type B" reorganization.
• B)This transaction qualifies as a reverse "Type C" reorganization.
• C)This transaction does not qualify as a reorganization, because Tree only receives 70% of Branch's stock. Tree needs to acquire at least 80% of the stock to qualify for tax-free treatment.
• D)This transaction does not qualify as a reorganization because Tree, the larger corporation, rather than Branch, the smaller corporation, ceases to exist after the transaction.
• E)None of the above statements is correct.

---

Definitions:

Gestalt Therapist

A practitioner of Gestalt therapy, a form of psychotherapy focusing on the individual's experience in the present moment, the therapist-client relationship, the environmental and social contexts of one's life, and the self-regulating adjustments people make as a result of their overall situation.

Gestalt Therapy

A form of psychotherapy that emphasizes personal responsibility and focuses on the individual's experience in the present moment, the therapist-client relationship, the environmental and social contexts of a person's life, and the self-regulating adjustments people make as a result of the overall situation.

Empty Chair

A therapeutic technique in psychology where a client speaks to an imaginary person or an object placed in an empty chair, used to express thoughts and feelings freely.

Meditation

A group of techniques that involve focusing attention on an object, a word, one’s breathing, or one’s body movements in an effort to block out all distractions, to enhance well-being, and to achieve an altered state of consciousness.