Acquiring Corporation is currently the parent of Subsidiary Corporation. Acquiring owns all the stock in Subsidiary.

Acquiring is now interested in acquiring either the assets or the stock of Target. Target holds a valuable license to produce military equipment that Acquiring is especially interested in obtaining. Target has assets worth $4,000,000, but with a tax basis of $1,000,000. Target has liabilities totaling $600,000 and E & P of $3,000,000.

The majority of Targets shareholders are favorable to a takeover by Acquiring, but they want the takeover to be tax-free. Some Target shareholders are opposed to the takeover, but they are willing to claim a dissenters right to be paid the value of their stock in cash. Some of the shareholders of Acquiring are concerned about assuming all of Targets liabilities.

Discuss the forms in which the takeover can occur to provide tax-free consequences to the shareholders. The dissenting shareholders own less than 20% of the Target stock.