Ocelot Corporation Is Merging into Tiger Corporation Under State Law

question 50

Multiple Choice

Ocelot Corporation is merging into Tiger Corporation under state law requirements.Ocelot transfers $300,000 of assets to Tiger in exchange for 30,000 shares and $200,000 in cash.Ocelot transfers the Tiger stock,$200,000 cash,and all of its liabilities ($50,000) to its shareholder,Van,in exchange for all of his Ocelot stock (basis $100,000) .Ocelot then liquidates.How will this transaction be treated for tax purposes?

• A)Since this qualifies as a "Type A" reorganization,Van recognizes no gain.
• B)Since this qualifies as a "Type C" reorganization,Van recognizes a $200,000 gain.
• C)Since this qualifies as a "Type A" reorganization,Van recognizes a $150,000 gain.
• D)Since this does not qualify as a reorganization,Van recognizes a $350,000 gain.
• E)None of the above.

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Definitions:

Defendant

A person or entity against whom a lawsuit is filed in a court of law.

Reasonable Person Test

A legal standard used to determine what a typical, prudent person would have done in similar circumstances, applied in various legal contexts.

Surety Bond

Insurance arranged in case a party to a contract fails to perform.

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The carrying out of the duties and obligations as stipulated in a contract by the involved parties.