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While other consideration besides stock can be paid under a type A reorganization, the price paid under a type B reorganization must be solely in stock. And while the target is dissolved in a type A reorganization, it can be retained in a type B reorganization.
The principal tax advantage of an "A" reorganization is the freedom allowed in choosing the consideration which may be used in the merger. The stock issued by the surviving corporation, or by its parent if a subsidiary is used, can be preferred or common, voting or nonvoting.
Type A reorganization is a ?statutory merger or consolidation.? These are mergers or consolidations effected pursuant to state corporate law. A merger is a union of two or more corporations. One corporation retains its existence and absorbs the others.
A type A Reorganization is a tax-free merger or consolidation. Generally, in a merger, one corporation (the acquiring corporation) acquires the assets and assumes the liabilities of another corporation (the target corporation) in exchange for its stock.
Under IRC § 368(a)(1)(A), a Type A reorganization is a ?statutory merger or consolidation.? An ?A? reorganization must meet the requirements of applicable state corporate law or the merger laws of a foreign jurisdiction, as well as regulatory requirements in Treas.
A Type A reorganization must fulfill the continuity of interests requirement. That is, the shareholders in the acquired company must receive enough stock in the acquiring firm that they have a continuing financial interest in the buyer.
In a typical merger, the assets and liabilities of T are transferred to P, and T dissolves by operation of law. The consideration received by T's shareholders is determined by a merger agreement. A consolidation is a transfer of assets and liabilities of two or more existing corporations to a newly created corporation.