Question 1

Identify which of the following statements is true.

Accepted Answer

A)  A split-off Type D reorganization occurs when part of the assets of one corporation are transferred to a controlled corporation in exchange for its stock, and shares of the controlled corporation's stock are distributed to all of the distributing corporation's shareholders without having them surrender any of their stock in the distributing corporation. 
B)  In a Type D reorganization, the existence of a good corporate business purpose is necessary before the stock of a controlled subsidiary can be distributed to the shareholders of the distributing corporation. 
C)  A distribution of a controlled corporation's stock can be a tax-free Type D reorganization, even if none of the distributing corporation's assets are transferred to the controlled corporation. 
D)  All of the above are false. 
A)  A split-off Type D reorganization occurs when part of the assets of one corporation are transferred to a controlled corporation in exchange for its stock, and shares of the controlled corporation's stock are distributed to all of the distributing corporation's shareholders without having them surrender any of their stock in the distributing corporation. 
B)  In a Type D reorganization, the existence of a good corporate business purpose is necessary before the stock of a controlled subsidiary can be distributed to the shareholders of the distributing corporation. 
C)  A distribution of a controlled corporation's stock can be a tax-free Type D reorganization, even if none of the distributing corporation's assets are transferred to the controlled corporation. 
D)  All of the above are false. B

Question 2

The acquiring corporation does not obtain the target corporation's tax attributes in

Accepted Answer

A)  a Type A reorganization. 
B)  a Type B reorganization. 
C)  an acquisitive Type C reorganization. 
D)  an acquisitive Type D reorganization. 
A)  a Type A reorganization. 
B)  a Type B reorganization. 
C)  an acquisitive Type C reorganization. 
D)  an acquisitive Type D reorganization. B

Question 3

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered, the difference may be

Accepted Answer

A)  a contribution to capital. 
B)  compensation for services. 
C)  a dividend. 
D)  All of the above are correct. 
A)  a contribution to capital. 
B)  compensation for services. 
C)  a dividend. 
D)  All of the above are correct. D

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  In a tax-free reorganization, the acquiring corporation's holding period for the acquired properties includes the period of time the target corporation held the properties. 
B)  In a tax-free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation. 
C)  The receipt of cash by a shareholder results in the recognition of all of his or her realized gain even if the transaction qualifies as a tax-free reorganization. 
D)  All of the above are false. 
A)  In a tax-free reorganization, the acquiring corporation's holding period for the acquired properties includes the period of time the target corporation held the properties. 
B)  In a tax-free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation. 
C)  The receipt of cash by a shareholder results in the recognition of all of his or her realized gain even if the transaction qualifies as a tax-free reorganization. 
D)  All of the above are false.

Question 5

Identify which of the following statements is true.

Accepted Answer

A)  Ann, Dewey Corporation's sole shareholder, exchanges her Dewey stock having a $400,000 FMV and a $175,000 adjusted basis for $350,000 of Heider Corporation stock and $50,000 cash. Ann realizes a $225,000 gain on the stock transfer, none of which is recognized. 
B)  A Type B reorganization can be accomplished without formal shareholder approval. 
C)  The target corporation's tax attributes are lost in a Type B reorganization. 
D)  All of the above are false. 
A)  Ann, Dewey Corporation's sole shareholder, exchanges her Dewey stock having a $400,000 FMV and a $175,000 adjusted basis for $350,000 of Heider Corporation stock and $50,000 cash. Ann realizes a $225,000 gain on the stock transfer, none of which is recognized. 
B)  A Type B reorganization can be accomplished without formal shareholder approval. 
C)  The target corporation's tax attributes are lost in a Type B reorganization. 
D)  All of the above are false.

Question 6

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year. Melon Corporation uses a calendar tax year. To use the Sec. 338 election, Melon Corporation must purchase

Accepted Answer

A)  an additional 50% of Hill Corporation stock by December 31 of this year. 
B)  an additional 50% of Hill Corporation stock by July 30 of next year. 
C)  an additional 51% of Hill Corporation stock by December 31 of this year. 
D)  an additional 51% of Hill Corporation stock by July 30 of next year. 
A)  an additional 50% of Hill Corporation stock by December 31 of this year. 
B)  an additional 50% of Hill Corporation stock by July 30 of next year. 
C)  an additional 51% of Hill Corporation stock by December 31 of this year. 
D)  an additional 51% of Hill Corporation stock by July 30 of next year.

Question 7

The Supreme Court has held that literal compliance with the statutory requirements for a reorganization transaction is not enough for a transaction to receive tax-free treatment. The courts have placed four primary restrictions on reorganization transactions. What are they?

Accepted Answer

• Continuity of the investor's proprieta

Question 8

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization. Brad also receives $6,000 cash as part of the reorganization. How much gain must Brad recognize?

Accepted Answer

Gain is recognized in a Type A

Question 9

Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation. Immediately after the incorporation, Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock. Motor Corporation is liquidated. Which of the following statements is correct?

Accepted Answer

A)  The asset transfer by Motor Corporation meets the statutory Type C reorganization requirements. 
B)  The IRS may collapse the two transactions into a single transaction, resulting in denial of tax-free reorganization treatment. 
C)  The IRS may apply the step transaction doctrine. 
D)  All of the above statements are correct. 
A)  The asset transfer by Motor Corporation meets the statutory Type C reorganization requirements. 
B)  The IRS may collapse the two transactions into a single transaction, resulting in denial of tax-free reorganization treatment. 
C)  The IRS may apply the step transaction doctrine. 
D)  All of the above statements are correct.

Question 10

Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting preferred stock and $200,000 (face amount and FMV) of securities. The assets have an adjusted basis of $600,000 and an FMV of $1,500,000. In addition, Acme Corporation assumes $500,000 of Fisher's liabilities. At the time of the transfer, Acme's E&P is $400,000. Fisher distributes the stock and securities to its sole shareholder Barbara for all of her Fisher stock. After the reorganization, Barbara owns 25% of Acme's stock. Barbara has an adjusted basis of $400,000 in her Fisher stock. What is Barbara's basis for her Acme stock?

Accepted Answer

Fisher stock basis $400,000
Mi

Question 11

American Corporation acquires the noncash assets of Utech Corporation in exchange for $700,000 of its voting stock plus $50,000 of cash. Utech Corporation assets are worth $750,000. Utech Corporation does not distribute the stock and cash but instead holds the stock as an investment. Utech will use the American cash along with the cash it retained to start a new business. The transaction can be classified as a

Accepted Answer

A)  Type A reorganization. 
B)  Type B reorganization. 
C)  Type C reorganization. 
D)  The transaction does not qualify as a tax-free reorganization. 
A)  Type A reorganization. 
B)  Type B reorganization. 
C)  Type C reorganization. 
D)  The transaction does not qualify as a tax-free reorganization.

Question 12

Johnson Co. transferred part of its assets to Alive Corporation in exchange for all of Alive's stock. The Alive stock received for the assets was distributed to the Johnson shareholders. What tax issues should the parties to the divisive reorganization consider?

Accepted Answer

The following points should be addressed

Question 13

Identify which of the following statements is true.

Accepted Answer

A)  The control requirement for Sec. 355 differs from the control requirement under Sec. 351. 
B)  Aspect Corporation transfers assets to newly created Expert Corporation in exchange for all of Expert's stock. Shortly after the transfer, Aspect exchanges one-half of the Expert stock that it receives for land. The individuals transferring the land have never been Aspect shareholders. This transaction qualifies as a divisive Type D reorganization and is tax-free to all parties. 
C)  Common stock can be exchanged for preferred stock in the same corporation as a Type E reorganization. 
D)  All of the above are false. 
A)  The control requirement for Sec. 355 differs from the control requirement under Sec. 351. 
B)  Aspect Corporation transfers assets to newly created Expert Corporation in exchange for all of Expert's stock. Shortly after the transfer, Aspect exchanges one-half of the Expert stock that it receives for land. The individuals transferring the land have never been Aspect shareholders. This transaction qualifies as a divisive Type D reorganization and is tax-free to all parties. 
C)  Common stock can be exchanged for preferred stock in the same corporation as a Type E reorganization. 
D)  All of the above are false.

Question 14

Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

Accepted Answer

A) True 
 B)False

Question 15

Acquiring Corporation acquires all of the stock of Target Corporation in a Type B (stock-for-stock) reorganization. Both corporations have always filed separate tax returns. Which one of the following statements regarding the acquisition is correct?

Accepted Answer

A)  Acquiring and Target Corporations can elect to file a consolidated tax return. 
B)  Acquiring and Target Corporations must file a consolidated tax return. 
C)  Acquiring Corporation assumes all of the tax attributes of Target Corporation. 
D)  Acquiring Corporation must step up or step down the basis of the Target Corporation's assets to their FMV on the acquisition date. 
A)  Acquiring and Target Corporations can elect to file a consolidated tax return. 
B)  Acquiring and Target Corporations must file a consolidated tax return. 
C)  Acquiring Corporation assumes all of the tax attributes of Target Corporation. 
D)  Acquiring Corporation must step up or step down the basis of the Target Corporation's assets to their FMV on the acquisition date.

Question 16

Carol owns Target Corporation stock having an adjusted basis of $41,000. As part of a Type C tax-free reorganization involving Revbo and Target Corporations, Carol exchanges her Target stock for $42,000 of Revbo stock and Revbo securities having a face amount and FMV of $8,000. What is Carol's basis in the Revbo stock?

Accepted Answer

The answer of Carol owns Target Corporation stock having an...

Question 17

Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000. The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation. Frank's basis in the Baxter stock he surrenders is $120,000. What is Duke Corporation's basis in the assets it receives?

Accepted Answer

Duke has a

Question 18

Identify which of the following statements is true.

Accepted Answer

A)  The step-transaction doctrine has always been used by the IRS to convert a tax-free transaction into a taxable transaction. 
B)  Tax attributes carry over from the target corporation to the acquiring corporation in all acquisitive reorganizations. 
C)  In a Type A reorganization, the net operating loss carryover can be used by the acquiring corporation without limitation in its first tax year that ends after the acquisition date. 
D)  All of the above are false. 
A)  The step-transaction doctrine has always been used by the IRS to convert a tax-free transaction into a taxable transaction. 
B)  Tax attributes carry over from the target corporation to the acquiring corporation in all acquisitive reorganizations. 
C)  In a Type A reorganization, the net operating loss carryover can be used by the acquiring corporation without limitation in its first tax year that ends after the acquisition date. 
D)  All of the above are false.

Question 19

Broom Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $400,000 to Docker Corporation in exchange for $400,000 of Docker Corporation stock as part of a tax-free reorganization. The Docker stock had been purchased from its shareholders one year earlier for $350,000. How much gain do Broom and Docker Corporations recognize on the asset transfer?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 20

What are the advantages and disadvantages of a Type C reorganization?

Accepted Answer

The answer of What are the advantages and disadvantages of...

Identify which of the following statements is true.

The acquiring corporation does not obtain the target corporation's tax attributes in

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered, the difference may be

Identify which of the following statements is true.

Identify which of the following statements is true.

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year. Melon Corporation uses a calendar tax year. To use the Sec. 338 election, Melon Corporation must purchase

The Supreme Court has held that literal compliance with the statutory requirements for a reorganization transaction is not enough for a transaction to receive tax-free treatment. The courts have placed four primary restrictions on reorganization transactions. What are they?

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization. Brad also receives $6,000 cash as part of the reorganization. How much gain must Brad recognize?

Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation. Immediately after the incorporation, Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock. Motor Corporation is liquidated. Which of the following statements is correct?

Johnson Co. transferred part of its assets to Alive Corporation in exchange for all of Alive's stock. The Alive stock received for the assets was distributed to the Johnson shareholders. What tax issues should the parties to the divisive reorganization consider?

Identify which of the following statements is true.

Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

Acquiring Corporation acquires all of the stock of Target Corporation in a Type B (stock-for-stock) reorganization. Both corporations have always filed separate tax returns. Which one of the following statements regarding the acquisition is correct?

Identify which of the following statements is true.

What are the advantages and disadvantages of a Type C reorganization?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

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Exam 7: Corporate Acquisitions and Reorganizations

Identify which of the following statements is true.

The acquiring corporation does not obtain the target corporation's tax attributes in

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered, the difference may be

Identify which of the following statements is true.

Identify which of the following statements is true.

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year. Melon Corporation uses a calendar tax year. To use the Sec. 338 election, Melon Corporation must purchase

The Supreme Court has held that literal compliance with the statutory requirements for a reorganization transaction is not enough for a transaction to receive tax-free treatment. The courts have placed four primary restrictions on reorganization transactions. What are they?

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization. Brad also receives $6,000 cash as part of the reorganization. How much gain must Brad recognize?

Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation. Immediately after the incorporation, Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock. Motor Corporation is liquidated. Which of the following statements is correct?

Johnson Co. transferred part of its assets to Alive Corporation in exchange for all of Alive's stock. The Alive stock received for the assets was distributed to the Johnson shareholders. What tax issues should the parties to the divisive reorganization consider?

Identify which of the following statements is true.

Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

Acquiring Corporation acquires all of the stock of Target Corporation in a Type B (stock-for-stock) reorganization. Both corporations have always filed separate tax returns. Which one of the following statements regarding the acquisition is correct?

Identify which of the following statements is true.

What are the advantages and disadvantages of a Type C reorganization?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters