Ace Corp. and Bate Corp. combine in a qualifying
reorganization and form Carr Corp., the only surviving corporation.
This reorganization is tax-free to the

Shareholders . . . . Corporations

(a) The requirement is to determine whether a qualifying
reorganization is tax-free to the corporations and their
shareholders. Corporate reorganizations are generally nontaxable.
As a result, a corporation will not recognize gain or loss on
the transfer of its assets, and shareholders do not recognize gain
or loss when they exchange stock and securities in parties to the
reorganization. Here, Ace and Bate combine and form Carr, the
only surviving corporation. This qualifies as a consolidation
(Type A reorganization) and is tax-free to Ace and Bate on the
transfer of their assets to Carr, and also is tax-free to the shareholders
when they exchange their Ace and Bate stock for Carr
stock. Similarly, the reorganization is tax-free to Carr when it
issues its shares to acquire the Ace and Bate assets.