Red Corporation Redeems All of Its Common and Preferred Stock

question 99

Multiple Choice

Red Corporation redeems all of its common and preferred stock. Red then exchanges this redeemed stock with Blue Corporation for 40% of Blue's voting common stock. The Blue stock is distributed to the Red shareholders. After the transaction, both Red and Blue corporations still exist. The former Red shareholders are now shareholders of Blue. This transaction qualifies as a(n) :

• A) "Type A" reorganization.
• B) "Type B" reorganization.
• C) "Type C" reorganization.
• D) Acquisitive "Type D" reorganization.
• E) Taxable event.

---

Definitions:

Artisan Lien

A legal right granted to craftsmen or laborers to retain possession of a client's property until payment is received for services rendered.

Entrusted

Pertains to the act of giving someone the responsibility to take care of something or to carry out a task or duty.

Subcontractor

An individual or business that signs a contract to perform part or all of the obligations of another's contract.

Unsecured Credit

A type of loan or credit that is not backed by collateral, meaning the lender relies on the borrower's creditworthiness and promise to repay.