King need not acquire 100 of jaxsons stock just a

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Unformatted text preview: g common stock solely in exchange for 50 percent of its voting common stock and retain Jaxson as a subsidiary after the transaction. Which of the following statements is true? a. King must acquire 100 percent of Jaxson stock for the transaction to be a tax-free reorganization. b. The transaction will qualify as a tax-free reorganization. c. King must issue at least 60 percent of its voting common stock for the transaction to qualify as a taxfree reorganization. d. Jaxson must surrender assets for the transaction to qualify as a tax-free reorganization. CPA-02095 Explanation Choice "b" is correct. The acquisition of a controlling (usually 80%) interest by one corporation in the stock of another corporation solely for stock is a tax-free (Type B) reorganization. Choice "a" is incorrect. King need not acquire 100% of Jaxson's stock, just a controlling interest. Choice "c" is incorrect. There is no specific amount of acquiring corporation stock that must be issued in a tax-free reorganization; the acquiring corporation must acquire 80% or more of the t...
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