Persistence Inc. (the \"Company"), an SEC registrant, is a global provider of software as a service (SaaS) whose focus is facilitation of electronic payments. On April 8, 20x2, the Company completed an exchange offer to acquire MyState Co. (MyState), an independent thirdparty software developer. The acquisition closed on April 11, 2OX2. The Company concluded that it should account for the acquisition of MyState as a business combination underASC 805, Business Combinations. Before the acquisition, MyState was involved in litigation with one of its former executives, John Slacker. Ajudgment was rendered against MyState in 20x1 that awarded Mr. Slacker $28 million. Because of the judgment, MyState recorded a liability (expense) in its nancial statements and placed funds into an escrow account. MyState had multiple directors' and ofcers' liability insurance policies in place that it believed covered losses associated with the lawsuit between MyState and Mr. Slacker. Before the Company's acquisition of MyState, MyState had led claims with its insurance carriers; however, all claims were denied. At the time the Company completed the acquisition, MyState had recorded no amount for expected insurance recoveries. On May 12, 20x2 (after the Company's acquisition of MyState}, a nal settlement was reached between MyState and Mr. Slacker in the original judgment amount of $28 million. After its acquisition of MyState, the Company pursued a claim against MyState's insurance carriers to recover the settlement paid to Mr. Slacker. The key activities and dates regarding the Company's pursuit of the insurance recovery are as follows: - On April 15, 20x2, the Company submitted claims against the insurance carriers. - On May 19, 20x2, the insurance carriers denied the Company's claim. - On August 17, 20x2, mediation took place between the Company and the insurance carriers, but failed to resolve the matter. - On September 15, 20x2, the Company led suit against the insurance carners who subsequently led a request for dismissal. - On November 8, 20x2, the court denied the request for dismissal, allowing the Company's suit against the insurance carners to continue. - On December 25, 20x2, the Company and the insurance carriers settled the claim for $16 million. The insurance carriers paid the claim before December 131, 20x2. . REQUIRED: . How should the Company account for the $16 million settlement with the insurance carriers'? o Task 1.b: Determine where in the FASB codification you will find the standards which pertain to your research questions. Suggestions include: o ASC 410-30, Environmental Obligations o ASC 450, Contingencies o ASC 610-30, Gains and Losses on Involuntary Conversions o ASC 805, Business Combinations o ASC 805-10, Business Combinations: Overall o ASC 805-20, Business Combinations: Identifiable Assets and Liabilities, and Any Noncontrolling Interest o ASC 805-50, Business Combinations: Related Issues o Task 2.a: Answer the question using the FASB Codification in the form of a tax memo. Use the template provided in D2L. There are 4 sections of a memo: 1. header; 2. purpose and summary; discussion section; call for action. Your memo must contain all 4. The grading rubric is located in D2L. 2-3 pages at maximum.tEMo Aurie Goldnger From: Elizabeth Turner Date: August 12, 2020 Re: Like-kind exchange FACTS Auric Goldnger exchanged 200 ounces ofgold bullion (adjusted basis, $601] 00, FMV $100,000) for 1,500 ounces of silver bullion (FMV 3100:000). ISSUE Does the exchange qualify as a nontaxable likekind exchange (nonrecogiiition of gain) under Code Sec. 1031?I DISCUSSION AND ANALYSIS Code Section 1031 provides that no gain or loss shall be recognized on the exchange of real property that is held, either for productive purposes in a business or for investment if such real property is exchanged for other real property of like kind. Properties are of like-kind if they're of the same nature or character, even if they differ in grade or quality (Code Section 1.1.03 {a)1(b)). One kind or class of property may not be exchanged for property of a different kind or class. For instance, the IRS has ruled that coins and bullion are not \"like kind," because coins have an intrinsic value (they are monetary units}. While usually very broad scoped in the case ofrealproperty likekindness, IRS has determined it makes a difference whether you are exchanging gold bullion for silver bullion. Letters issued in 1930 CLTR 8020107, Feb. 25, 1980) and 1981 (LTR 8128102,April 20, 1931) concluded that gold bullion was like kind to silver bullion. After the difference in markets was pointed out Revenue Ruling 82166, 19822 CB 190, J anuary 1, 1982 holds that although the metals have similar qualities and uses, silver and gold are intrinsically dierent metals and primarily are used in different ways. Silver is essentially an industrial commodity. Gold is primarily utilized as an investment in itself. An investment is one of the metals is fundamentally di'etent from an inveshnent in the other metal. A Revenue Ruling trumps an IRS Private Ruling. Letter Rulings are issued for a fee upon a taxpayer's request and describe how the IRS will treat a proposed transaction for tax purposes. They apply only to the taxpayer who asks for and obtains a ruling. Revenue Rulings are ofcial pronouncements of the National Oice of the IRS. Therefore, the silver bullion and the gold bullion are not property of like kind. The [18 held that a taxpayer's exchange of gold bullion for silver bullion does not qualify for nonrecognition of gain under section 1031(3) of the Code. CONCLUSION This exchange will not qualify as a nontaxableexchange under Code Section 1031. Auric Goldfmger will have to pay the tax on the $40,000 gain of the gold billion. 1 would advise against the aggressive tax position of treating the exchange as nontaxable although some might see say there is no apparent like kind di'erence between gold and silver, and the IRS attempting to create one introduces the sort of uncertainty Congress wanted to avoid inthe Tax Code. Another thing to consider is how long Mr. Goldnger has held the gold (short-term vs. long-term (held for more than one year which will determine the tax rate for capital gains