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  3. b owns 40% and c owns 60% of the stock of target.

B owns 40% and C owns 60% of the stock of Target. Target merges into...

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Accounting

B owns 40% and C owns 60% of the stock of Target. Target merges into Acquiring under applicable state corporate law. B receives Acquiring non-voting common stock and C receives cash. After the merger, B owns 5% of the outstanding Acquiring stock. Choose the best answer:

The transaction is not a reorganization because the distribution of cash is not pro-rata.

The transaction is not a reorganization because A receives non-voting Acquiring stock.

The transaction is not a reorganization because B will own less than 40% of the stock of Acquiring after the transaction.

The transaction constitutes a reorganization (provided non-statutory requirements other than CoI are satisfied).

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