Publishing Company, Inc. ("P") is a publicly traded C corporation engaged in the publication of professional textbooks. P has 5 million shares of voting common stock outstanding. The stock is currently trading at$10per share.

P wishes to acquire control of Target Press, Inc. ("T"), a closely held corporation that is the leading publisher of student study aids for law students. T has 4,000 shares of common stock (its only class) outstanding, held by 10 shareholders each of whom owns 400 shares. T's assets and liabilities are as follows:

Asset	Adjusted Basis	Fair Market Value
Cash	$600,000	$600,000
Inventory	200,000	1,000,000
Equipment	800,000	1,400,000
Goodwill	0	2,000,000
	$1,600,000	$5,000,000

Liabilities

Bank Loan	$1,000,000
	$1,000,000

BothPandThave substantial accumulated earnings and profits.

T's board of directors has agreed to sell the business for$4million. Four of T's shareholders have a very low adjusted basis in their stock and wish to minimize their taxable gain on a sale. One shareholder, Dee Minimis, recently inherited her stock and would not have any significant realized gain. The other shareholders are interested in diversifying their investments and less concerned about the tax liability on a sale.

Pdoes not wish to dilute the interests of its current shareholders by issuing too much voting common stock to acquireT, butPis willing to use a mix of consideration (including newly issued preferred stock) and to assume T's$1,000,000bank loan. For business reasons, P ultimately wishes to operate T's business through a wholly-owned subsidiary and would prefer to avoid exposure to any unknown T liabilities. Assume that any preferred stock used by P to make the acquisition is not "nonqualified preferred stock" within the meaning of Section351(g).

Various plans are under consideration to complete the acquisition. Consider generally the tax consequences of each of the alternative plans described below, focusing on whether the acquisition will qualify as a tax-free reorganization. Then propose one or more desirable alternatives that are compatible with the objectives of the parties. Unless otherwise indicated, assume in all cases that the consideration to be exchanged for stock or assets ofTis valued as of the date that the contract was legally binding.

For each presented scenarios, discuss if the transactions qualify as reorganization in accordance with IRC section 368- 1 (a)-(c). If the transaction is considered a reorganization, your respond should clearly state which type of reorganization it is and provide an explanation as to why it qualifies as such. If the transaction does not qualify as a reorganization, why not? Provide supporting calculations.

In addition, state the tax consequences to all parties involved in the transaction.

1. T merges directly intoP, and eachTshareholder receives$300,000ofPnonvoting preferred stock and$100,000ofPfive-year notes.

(f) In exchange for their respective 400 shares ofTstock,Ptransfers to eachTshareholder$360,000ofPvoting preferred stock and$40,000cash.

(h)Pacquires all theTassets, and assumes the$1,000,000liability, in exchange for$3.6million ofPvoting common stock (360,000 shares) and$400,000inPfive-year notes. Immediately thereafter,Tcompletely liquidates, distributing thePshares and notes pro rata to its shareholders.Pdrops down the assets it acquires toS, a newly created subsidiary