Gulf Corporation wants to acquire all of Beamer Corporation's assets and liabilities in a Type C reorganization. The FMV of Beamer's assets is $500,000. Beamer's liabilities are $70,000. How much cash can Gulf Corporation use to pay for Beamer's assets without violating the Type C reorganization requirements?
What will be an ideal response?
0.20 × $500,000 = $100,000 noncash consideration - $70,000 liabilities = $30,000 cash. $30,000 in cash can be used in addition to the $400,000 of Gulf voting stock and the assumption of $70,000 of Beamer liabilities.
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