Square Corporation owns 100% of the stock of Circle Corporation. Square is now interested in acquiring either the assets or the stock of Triangle Corporation.Triangle holds a valuable license to produce military equipment that Square is especially interested in obtaining.Triangle has assets worth $4,000,000 but with an adjusted basis of $1,000,000.Triangle has liabilities totaling $600,000 and earnings and profit of $3,000,000.The majority of Triangle's shareholders are favorable to a takeover by Square, but they want the takeover to be tax-free.There are some Triangle shareholders who are opposed to the takeover, but they are willing to claim a dissenter's right to be paid the value of their stock in cash.Some of the shareholders of Square are concerned about assuming all of Triangle's liabilities.

1. Discuss the forms in which these goals can be achieved as part of a tax-free reorganization. Discuss the tax consequences (recognized gain and/or loss for corporations and shareholders; adjusted basis of corporate assets for each corporation; recognized gain and/or loss each corporations' shareholders and adjusted basis for any stock received). For this part of the question, ignore the dissenting shareholders.
2. Assuming that dissenting shareholders own less than 20% of the Triangle stock how would your answers to part a. change if, as part of a tax-free reorganization, Square must buy these shareholders' Triangle stock for cash?