Purchasing Company, Inc. ("P") is a publicly traded C corporation that has 5 million shares of voting common stock outstanding trading for $10 per share.P wants to acquire a target corporation ("T") that has 4,000 shares of common stock outstanding, all of which is owned equally by 10 shareholders (each shareholder owns 400 shares).Both P and T have substantial accumulated earnings and profits.T has the following assets and liabilities:

Cash $600,000

Inventory:basis of $200,000 and value of $1,000,000

Equipment:basis of $800,000 and value of $1,400,000

Goodwill:basis of $0 and value of $2,000,000

Bank loan:$1,000,000

Answer true or false for each scenario:

1. T merges directly into P.Each T shareholder receives $300,000 of P nonvoting preferred stock (not nonqualified preferred stock) and $100,000 of P five-year notes.The acquisition qualifies as an A reorganization.Answer: True/False
2. Same as (a) above, except four T shareholders receive $400,000 of P common stock and the other six receive $400,000 in cash.Ignore the IRS safe harbor (see Rev. Proc. 77-37) and adhere to the law instead (see Reg. 1.368-1(e)(2)(v), Example 1;John A. Nelson Co. v. Helvering, 296 U.S. 374 (1935);Miller v. Commissioner, 84 F.2d 415 (6th Cir. 1936)).The acquisition qualifies as an A reorganization.Answer: True/False
3. Same as (b) above, except four T shareholders only receive $250,000 in P stock simply because it declined in value (down from $400,000) between the time the merger agreement was signed and four months later, when the merger was finalized.The remaining six T shareholders receive cash of $400,000.The acquisition qualifies as an A reorganization.Answer: True/False
4. Same as (a) above, except shortly after the merger and as part of its original plan, P sells T's assets to an unrelated party for a nice profit.The acquisition qualifies as an A reorganization.Answer: True/False
5. In exchange for their respective 400 shares of T stock, P transfers to each T shareholder $360,000 of P voting preferred stock and $40,000 cash.The acquisition qualifies as aB reorganization.Answer: True/False
6. P purchases 400 T shares from a single shareholder of T who was looking to cash out for $400,000.Three months later, P transfers $400,000 of P voting preferred stock to each of the nine remaining T shareholders in exchange for the remaining shares of T.The acquisition qualifies as a B reorganization.Answer: True/False
7. P acquires all of T's assets and assumes T's bank loan in exchange for $3.6 million of P voting common stock (360,000 shares) and $400,000 in P five-year notes.Immediately thereafter, T completely liquidates by distributing the P shares and notes pro rata to its shareholders.P drops down the assets it acquires to S, a newly created subsidiary of P.The acquisition qualifies as a C reorganization.Answer: True/False
8. Same as (g) above, except that T retains $400,000 of its cash.P acquires the balance of T's assets for $3.6 million in P voting stock and P also assumes T's bank loan.T immediately distributes the P stock and $400,000 cash pro rata to its shareholders so as to liquidate.Answer: True/False