Manx Corporation transfers 40% of its stock and $50,000 in cash to Somali Corporation for $500,000 of assets and all $200,000 of its liabilities. Somali exchanges the Manx stock, cash, and its remaining $100,000 of assets with its shareholders for all their Somali stock. After the exchange, Somali liquidates. The exchange qualifies as what type of transaction

Question

Business

Owen Lin

29 September, 08:49

Manx Corporation transfers 40% of its stock and $50,000 in cash to Somali Corporation for $500,000 of assets and all $200,000 of its liabilities. Somali exchanges the Manx stock, cash, and its remaining $100,000 of assets with its shareholders for all their Somali stock. After the exchange, Somali liquidates. The exchange qualifies as what type of transaction

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Answers (1)

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Jadon Dickson · Answer 1

Type A reorganization

Explanation:

A type A reorganization can be classified as a merger or a consolidation. It is a type of tax free reorganization, where the acquiring company includes stocks and cash to purchase the assets of the acquired company. This type of transactions occur in a consensual basis between the companies.