As part of an integrated plan, Manchester Corporation creates Bedford Corporation as a wholly owned subsidiary. Then, Manchester acquires all of Bismarck Corporation by merging Bedford into Bismarck. After this transaction, Bedford no longer exists and Manchester owns all of the Bismarck stock valued at $1 million. Bismarck shareholders received Manchester stock valued at $700,000 and $300,000 of cash for their shares of Bismarck. Lastly, Bismarck combines with Manchester in a statutory merger.

The final result is that Manchester owns all of the assets of Bismarck, and 70 percent of the Bismarck shareholders are now Manchester shareholders. Explain whether this step transaction restructuring qualifies as a tax-free reorganization. Support your position with citations to primary tax sources.