Amaranth Corporation would like to acquire the rights to a chemical proc ess owned by Bistre Corporation. Bistre cannot sell the process because the rights are not transferrable under the terms of the controlling contract. An acquisitive "Type D" reorganization seems like a solution, but Amaranth does not want all of Bistre's assets to be retained in the successor corporation.
Amaranth suggests that Bistre spin off the unwanted assets into a new corpora tion and then proceed with the acquisitive "Type D" reorganization in which Amaranth transfers all of its assets in exchange for 75% of Bistre's stock. Explain whether the transactions conducted sequentially in these steps receive a favorable income tax treatment.