Question

Which of the following statements is correct with regards to liabilities in corporate reorganizations?

a.Liabilities are problematic for a "Type C" only when the acquiring corporation transfers other property in addition to common stock.

b.Long-term liabilities (bonds) can be exchanged tax-free in a "Type E" reorganization, as long as the terms of the bonds are greater than 10 years and the interest rates are identical.

c.In a "Type G" reorganization, the target's liabilities rarely are liquidated.

d.While in a "Type A" merger all the liabilities of the target must be acquired, in a consolidation only general liabilities are transferred.

e.None of these choices are correct.

Answer 1

a.Liabilities are problematic for a "Type C" only when the acquiring corporation transfers other property in addition to common stock. - Correct option

c.In a "Type G" reorganization, the target's liabilities rarely are liquidated- Incorrect (because it is exceptional rule)
d.While in a "Type A" merger all the liabilities of the target must be acquired, in a consolidation only general liabilities are transferred. = incorrect (The acquiring company must assume all liabilities of acquired company.
b.Long-term liabilities (bonds) can be exchanged tax-free in a "Type E" reorganization, as long as the terms of the bonds are greater than 10 years and the interest rates are identical. incorrect