reorganizations .§ 1563 defines B u s i n e s s F i n a n c e
Provide responses to the following questions related to a Type A reorganizationWhat type of consideration can be paid for the target corp?Describe whether recognition of gain or loss occurs if the reorganization has non-stock consideration?Are there any restrictions with respect to the liabilities of the target?Describe the treatment of tax attributes and positive E&P.Citrus Corp enters into a Type C reorganization with Fuchsia Corp. Fuchsia transfers $800,000 of its voting stock for Citrus’ $1.2 million in assets (basis $600,000) and $400,000 of liabilities. Citrus retains one asset, land, which it distributes to its sole individual shareholder, Carmen. The land is valued at $130,000, and its basis is $80,000. Carmen’s basis in her Citrus stock is $970,000. Determine the income tax consequences for Citrus, Fuchsia, and Carmen, including the Fuchsia’s basis ion the stock it receives from Citrus and Carmen’s basis in the Fuchsia stock she receives.Parentis Corporation is going to acquire Bullseye Corporation by merging Bullseye into Parentis in a statutory merger under state law. Bullseye has $5 million of assets (adjusted basis is $1.6 million) and a single bank loan in the amount of $1 million. Bullseye has 4,000 shares outstanding owned by ten individuals. Consider the tax consequences of each of the following independent scenarios, focusing on whether the acquisition will qualify as a tax-free reorganization. You may cross-reference between answers to the extent your explanations are duplicative but be clear about what you are referencing.Bullseye shareholders receive consideration in the form of 75% nonvoting Parentis preferred stock (it is not nonqualified preferred) and 25% a promissory note payable by Parentis.Bullseye shareholders that own 40% of the stock receive $400,000 each of Parentis voting common stock and the other six Bullseye shareholders receive $400,000 cash each. Same as previous (b) except that the after the merger deal was signed, the value of Parentis’ stock dropped and thus the 4 shareholders that received Parentis stock in exchange for their 40% of Bullseye received only $250,000 each of Parentis stock (but the same number of shares as outlined in the deal).Each Bullseye shareholder receives $400,000 of Parentis stock. Pursuant to a binding agreement entered into prior to the merger, 6 of the former Bullseye shareholders (who held 60% of the Bullseye stock), sell their new Parentis shares for cash to a third party three weeks after the merger.Two of the underlying doctrines for the tax-free treatment of a reorganization are the “continuity of interest” and the “continuity of business enterprise.” Define each of these and explain why these doctrines are part of the reorganization code and regulations for tax. Lastly, explain how the continuity of interest is embedded (if it is) in the Type A, B, C, and acquisitive D rules for reorganizations.§1563 defines a “controlled group” of corporations; whereas §1504 defines an “affiliated group” of corporations. Define the three types of controlled groups and define what the requirements to be part of an affiliated group are and compare and contrast these two requirements.Using the video I provided, explain the following concepts under §382What is an ownership change that will trigger a §382 limitation?Explain the computation of the loss limitation under §382 and provide a basic original exampleWhat are the parameters required to be in place to file a consolidated return?