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Category: Tax
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Experience:  CPA with tax experience.
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Rosa Corporation transfers $1 million of its voting stock and

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Rosa Corporation transfers $1 million of its voting stock and $200,000 cash to Clara Corporation in exchange for 90% of its assets. Clara uses all of its remaining assets and the cash received from Rosa to pay its liabilities. Clara then distributes the Rosa stock to its shareholders in exchange for all of their shares of Clara. Lastly, Clara terminates. This restructuring qualifies as a:
a. “Type A” reorganization.
b. “Type B” reorganization.
c. “Type C” reorganization.
d. “Type D” reorganization.
e. Taxable exchange.

Please explain your answer.

Thanks for your question. The answer is D- Type D.

This type of reorganization involves a transfer by a corporation of part or all of its assets to another in exchange for stock or securities, as long as immediately after the transfer the transferor owns sufficient stock to control the transferee, and the transferee's stock and securities are distributed to shareholders of the transferor in a transaction that qualifies under Code Sec. 354, 355, or 356

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