The following table contains the facts for this problem. You are working for Cabo (the acquirer), who wants to purchase Golden Gate. Cabo is considering a taxable stock purchase at a price of $ 150,000 or some type of tax- free acquisition.

Based on the facts and the data in the table,
a. What is Golden Gate shareholders€™ after- tax wealth under a Section 368 €œ A€ structure based on the terms presented in the table?
b. What is Golden Gate shareholders€™ after- tax wealth under a Section 368 €œ B€ structure based on the terms presented in the table?
c. What is Golden Gate shareholders€™ after- tax wealth under a Section 351 structure based on the terms presented in the table?
d. At what pretax purchase price in a Section 368 €œA€ will the shareholders of Golden Gate be indifferent, relative to a taxable stock purchase at $ 150,000?
e. At what pretax purchase price in a Section 368 €œB€ will the shareholders of Golden Gate be ­indifferent, relative to a taxable stock purchase at $ 150,000?
f. At what pretax purchase price in a Section 351 are the shareholders of Golden Gate indifferent, relative to a taxable stock purchase at $ 150,000?
g. Ignoring nontax costs, will Cabo prefer one of the tax- free structures relative to the taxable stock acquisition at $ 150,000? Why?
h. How large would the nontax costs of a Section 368 B have to be to cause Cabo to prefer the taxable stock acquisition at a price of $ 150,000 relative to the Section 368 B at the pretax price computed in part f?

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Fact Pattern for Problem 4 Purchase price Net tax basis of target's assets Target shareholders' basis in target stock 150,000.00 20,000.00 5,000.00 3596 2096 4 years 12.500% 10.324% Estimated holding period for aquiring firn stock obtained in the merger Estimated pretax appreciation in acquirer stock post acquisition Taxable Structure Tax-Free Acquisition Structures Section 368 "B (2) $150,000.00 $150,000.00 $150,000.00 Section 368 Section 351 (4) Stock Sale without a Section 338 Election $150,000.00 150,000.00 Purchase price: Cash component Stock component 60,000.00 90,000.00 150,000.00 0.00 90,000.00 60,000.00 0.00