Crested Serpent Eagle CSE) Corporation is owned by Lin Yuan and Yu Chi. It has been in the manufacturing and lumber businesses for 20 years. For liability protection, the manufacturing assets of CSE are transferred to Serpent Corporation for all its stock. This stock is distributed to Lin Yuan in exchange for her CSE stock. The lumber assets are transferred to Eagle Corporation for all of its stock. Yu Chi receives the Eagle stock in exchange for his CSE shares. CSE then terminates.
A) The transaction qualifies as a spin-off "Type D" reorganization.
B) The transaction qualifies as a split-off "Type D" reorganization.
C) The transaction qualifies as a split-up "Type D" reorganization.
D) The transaction is taxable.

Question

Quizplus · Accepted Answer

The transaction qualifies as a split-up "Type D" reorganization because CSE Corporation is dividing its businesses into two new corporations and distributing the stock of these new corporations to its shareholders in exchange for their CSE stock, resulting in the termination of the original corporation.

Crested Serpent Eagle CSE) Corporation Is Owned by Lin Yuan