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A. In a Type A reorganization under recent Treasury? Regulations, at least? 30% of the consideration used must be the acquiring? corporation's stock. This rule permits money securities and other property to constitute up to? 70% of the total consideration used.
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.
If a transaction qualifies as a ?reorganization,? it is generally tax free both to the shareholders and to the corporation. However, to the extent non-stock consider- ation (such as cash or other property, often referred to as ?boot?) is received, gain is generally recognized.
A merger is a union of two or more corporations. One corporation retains its existence and absorbs the others. On the other hand, a consolidation occurs when a new corporation is created to take the place of two or more corporations.
Disadvantages Shareholders of either entity may dissent; in most states, their shares must be redeemed. Acquiring entity must assume all liabilities of Target.
Summary. 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.
A merger is an agreement that unites two existing companies into one new company. There are several types of mergers and also several reasons why companies complete mergers. Mergers and acquisitions (M&A) are commonly done to expand a company's reach, expand into new segments, or gain market share.