Question

For each of the scenarios provided (1-12) answer the followingquestions:

a. Is the transaction taxable?
b. If not, indicate the type of reorganization.
c. In 2 or 3 sentences, support your decision. For example, if youstate the transaction is a Type B reorganization, explain why thetransaction qualifies as a Type B reorganization.

Scenario:

Red Corporation owns assets valued at $500,000 and liabilitiesat $200,000, and White Corporation has assets valued at $1 millionand liabilities of $150,000. Red transfers 75% of its voting stockto White in exchange for 90% of its assets. White distributes theRed stock, its own remaining assets, and all of its liabilities tothe White shareholders. White then liquidates.

Green Corporation holds assets valued at $600,000 andliabilities of $150,000. Blue Corporation transfers $540,000 of itsvoting stock for 90% of Green’s assets. Blue assumes none ofGreen’s liabilities. Green distributes the Blue stock, its ownretained assets, and its liabilities to the Green shareholders andthen liquidates.

Orange owns assets valued at $400,000 and liabilities of$100,000. Yellow Corporation exchanges $200,000 of its voting stockand land worth $100,000 for all of Orange’s assets and liabilities.Orange distributes the Yellow stock to the Orange stockholders andretains the land.

Apricot Corporation moves its headquarters and incorporationfrom Rochester, New York, to Santa Fe, New Mexico. It changes itsname to Chile Pepper, Inc.

Pink Corporation holds assets valued at $500,000 and liabilitiesat $100,000. Black Corporation transfers $350,000 of its votingstock and $50,000 of nonvoting stock for all of Pink’s voting andnonvoting stock. Pink becomes a subsidiary of Black.

Gray Corporation’s paperclip division owns assets valued at$300,000 and liabilities of $50,000. The staple division holdsassets valued at $900,000 and liabilities of $150,000. Gray wouldlike the two divisions to be separate corporations. It createsSilver Corporation and transfers all of the paperclip divisionassets and liabilities in exchange for 100% of Silver’s stock. Graythen distributes the Silver stock to its own shareholders inexchange for 25% of their stock in Gray. The divisions have been inexistence for 10 years.

Purple holds assets valued at $800,000 and liabilities at$200,000. Brown Corporation transfers $280,000 of its voting stockfor 60% of Purple’s assets and all of its liabilities. Purpledistributes the Brown stock and its remaining assets to the Purpleshareholders. Purple then liquidates.

Rust Corporation holds assets valued at $500,000 and liabilitiesat $150,000. Beige Corporation transfers $350,000 of its votingstock and $30,000 in cash for all of Rust’s assets and assumes 80%of its liabilities. Rust distributes the Beige stock, cash, and theremaining Rust liabilities to its shareholders and thenliquidates.

Gold Corporation owns assets valued at $850,000 and liabilitiesat $800,000. To keep its creditors from foreclosing, Gold creates anew corporation, Fish, Inc., and transfers all of Gold’s assets toFish under the guidance of the state court. The creditors received$800,000 of Fish stock, and the former Gold shareholders receivethe remaining shares in Fish.

Cyan Corporation holds assets valued at $100,000 withliabilities of $20,000. Coral Corporation has assets valued at$900,000 with liabilities of $100,000. Cyan exchanges 80% of itsvoting stock for 40% of Coral’s assets and liabilities. Coraldistributes the Cyan stock and the remaining Coral assets andliabilities to the Coral shareholders. Coral then liquidates.

Fuchsia Corporation obtained 40,000 shares of SlateCorporation’s stock four years ago. In the current year, Fuchsiaexchanges 20% of its stock for 42,000 of the remaining 60,000shares of Slate stock. After the transaction, Fuchsia owns 82,000of the 100,000 Slate shares outstanding.

Chartreuse Corporation has two lines of business (waterpurification and mining), which have been conducted for the past 20years. Chartreuse’s shareholders decide that it would be best tosplit Chartreuse into two corporations. The assets and liabilitiesof the water purification plant are transferred to Aqua Corporationin exchange for all of its stock. The mining division’s assets andliabilities are exchanged for all of the stock in CopperCorporation. The Aqua and Copper stock is distributed to theChartreuse shareholders in return for all of their Chartreusestock. Chartreuse then liquidates.