Reorganization are one of the few remaining ways to exchange property without current reorganization of gain or loss Most reorganization issues related either to characterizing the transaction as a recognition o determining the tax consequences to the parties of such characterization. Because the second set of issues is common to all types of reorganization, we will overview that set first, assuming a property characterization of the transaction as reorganization.

The tax categories of reorganization using the term broadly can be grouped in various ways. Under the approach of this lesson, reorganization come in four basis types:

Reorganization involving one corporation Type E also knows as recapitalization: Section aE; Type F section aF

Reorganization involving acquisition of assets of a target corporation by another corporation Type A: Section aA; Type C section aC; Nondivisive Type D: Section aD; Type G section aG

Reorganization involving acquisition of stock of a target corporation by another corporation Type B: Section aB

Triangular variant on the Type A B and C reorganization Sections aCaDaE

reorganization involving division of a single corporation divisive reorganization section aD andor section

In every organization, or more but not necessarily all of the following potentially taxable Section disposition of property will occur:

Disposition : Exchange by the target corporation of its assets principally for stock of another corporation.

Disposition : Distribution of such stock and possibly other property by the target to its shareholders and possibly to its creditors.

Deposition : Exchange with the target by its shareholders and creditors of their stock or debt for the distributed stock and any other property.

Disposition and are obviously opposite ends of the same exchange.

Assumption A owns all of the stock of T the only asset of which is acreage that had been used as one of the last surviving drivein theaters, with an adjusted basis of $ and a fair market value of $ As basis in the T stock is $ Y a publicly held grocery chain, wants to acquire the property for a store site. Y is willing to give either its voting common stock worth $ in exchange for the property in a taxable transaction or its stock with $ in exchange for the property or for the stock of T in a transaction that will be taxfree to A and T

Can A avoid gaining recognition by a likekind exchange of T stock for Y stock under section Under any other section? If Y offers to exchange one of its publicly traded bonds for T stock, should A accept the offer? Why is Y willing to give only $ worth of stock in taxfree exchange?

The parties agree on a type C reorganization, with T trading the land for Y stock worth $ and then liquidating. Y will give T some treasury shares Y bought in the market for $ Assume this will qualify as a good type C reorganization to which T and Y are parties to a reorganizationie T and Y are on the section b guest list

Upon disposition how much gain will T realize and recognize?

Alternative: What if T had received $ cash in addition to the Y stock?

Upon disposition how much gain will T recognize?

Upon disposition how much gain will A realize and recognize? What will be As basis in the Y stock?

Alternative: What if A had received $ cash in lieu of $ worth of Y stock?

How much gain will Y recognize upon exchanging its treasury shares for the land?