Which Form 1120 C Assets 2023-2024

In this video, we're going to talk about type C tax-free reorganizations. In a type C tax-free reorganization, the purchasing corporation, in this case, jalapeno pancakes, a restaurant chain, transfers voting stock and possibly some boot. The boot must be at least 80% of the consideration being voting stock, with the other 20% being cash or something similar. However, if jalapeno pancakes assumes any liabilities from the Target Corporation, the amount of consideration can be reduced dollar for dollar for each assumed liability. If the amount of assumed liabilities exceeds 20% of the total consideration, jalapeno pancakes must give voting stock as consideration. Typically, 80% voting stock and up to 20% cash or property can be transferred. The target in this case is liquid sugar syrup. Jalapeno pancakes transfers the voting stock and some boot or 100% voting stock to the target corporation. In return, the target gives substantially all of its assets to jalapeno pancakes. Substantially all means that almost all of the assets must be transferred, and unwanted assets cannot be sold before the acquisition. If not all assets are transferred, there may be tax consequences. After the assets have been transferred, the target corporation liquidates. Liquidation is different from dissolving the corporation. By liquidating, the target distributes everything it received from jalapeno pancakes to its shareholder, Suzy. Suzy receives the voting stock and any cash or other property. This distribution is tax-free for Suzy since the property is technically coming from liquid sugar syrup, not jalapeno pancakes. Liquid sugar syrup also does not recognize any gain unless there are assets that were not transferred to jalapeno pancakes, resulting in those assets recognizing gain upon liquidation. Suzy's basis in the new shares she receives will be a substituted basis. It will be the same as her basis in her old shares...