JIM is acquiring all of the assets of Mason Machining, Inc. in a merger transaction. Mason transfers assets having a FMV of $1,775,000 and an adjusted basis of $995,000 and $200,000 in liabilities to JIM in exchange for $750,000 in cash and $800,000 of JIM's common stock.

Click here to view Mason's Acquisition Data.

Explain what type of merger this is. JIM distributes its stock and cash to Mason in exchange for all of its assets.

Calculate Mason's gain on this transaction.

How much of this gain will Mason recognize?

How must tax liability will Mason incur from this transfer?

Mason distributes the JIM stock and cash to its shareholders for all of their shares of Masons stock. Shareholders' basis in this stock is $600,000.

Calculate how much gain the Masons shareholders will realize and recognize on this transfer.

How must tax liability will Masons shareholders incur from this transfer?

Explain the tax implications for JIM.