(1)   Does this transaction satisfy the requirements for a Type D reorganization? In your answer, discuss the requirements for a Type D reorganization and whether they are satisfied in this case.

(2)   Without prejudice to your answer in Part (1), assume the transaction qualifies as a Type D reorganization. How much gain do McIlroy, Koepka, and Kelsey recognize?

(3)   What is Koepka’ basis in the assets transferred to it by McIlroy?

(4)   What is Kelsey’s basis in her Koepka stock?

McIlroy has two shareholders, Kelsey and Katie. They purchased their stock in McIlroy ten years ago at a cost of $25,000 each. McIlroy has manufactured golf equipment and soccer equipment for the past ten years. In the current year, McIlroy transfers all the assets used to manufacture golf equipment to Koepka Corporation for all the stock in Koepka. The assets transferred to Koepka have a fair market value of $300,000 and a basis of $100,000. The stock in Koepka is also worth $300,000. McIlroy then exchanges all the stock in Koepka for all of Kelsey’s stock in McIlroy.