a) Aristech Chemicals has two divisions that have been engaged in the manufacture and sale of chemicals and plastics, respectively, for the last ten years. Aristech Chemicals has 500 shares outstanding, 400 of which are held by Sunoco and 100 by a group of individuals who manage Aristech. The value of the Aristech stock has increased dramatically through the efforts of the Aristech managers. The Aristech managers are considering leaving Aristech unless they are given a controlling equity interest in the plastics business. In response to their request, Sunoco has made the following two-step offer: (i) Aristech will transfer to a new wholly owned subsidiary, solely in exchange for 500 shares of subsidiary stock, the plastics assets are subject to liabilities directly related to that business; (ii) Aristech will the distribute 300 share of the subsidiary's stock to the Aristech managers in exchange for all of their Aristech shares and 200 shares of the subsidiary stock to Sunoco, without Sunoco surrendering any Aristech shares. The value of the subsidiary shares distributed to the Aristech managers will equal the value of their surrendered Aristech shares. Would Aristech, subsidiary, the Aristech managers or Sunoco recognize any taxable gains on the transactions?

b) Same as question (a) except Aristech distributes 200 shares of subsidiary stock to the Aristech managers in exchange for their Aristech stock and 300 shares to Sunoco. Thereafter, Sunoco sells 100 subsidiary shares to the Aristech managers for a $150 Million interest bearing promissory note. What are the tax consequences?