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:

Merit Raises

Increases in an employee's base pay based on performance evaluations.

Profit Sharing

A compensation strategy where employees receive additional pay based on the company's profits.

Profit-Sharing Plans

Programs that distribute a portion of an organization’s profits to its employees, aligning employees' interests with the financial success of the company.

Free Rider

An individual who benefits from resources, goods, or services without paying for them, often discussed in the context of public goods or collective efforts.