Exam 7: Corporate Acquisitions and Reorganizations

Parent Corporation purchases all of Target Corporation's stock for $200,000 and makes a deemed liquidation election. Target Corporation has Class I assets with an adjusted basis of $55,000 and an FMV of $55,000; Class II assets with an adjusted basis of $40,000 and an FMV of $60,000; and Class V assets with an adjusted basis of $70,000 and an FMV of $100,000. The Class V assets are subject to a $20,000 liability. Assume a 34% corporate tax rate. What is the adjusted grossed-up basis of Target Corporation's stock?

Identify which of the following statements is true.

Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash. Drexel Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV. The assets are subject to $200,000 in liabilities. Drexel Corporation shareholders purchased their stock eight years ago for $300,000. Axle Corporation's basis in the Drexel Corporation stock is

Paper Corporation adopts a plan of reorganization and exchanges 1,000 shares of its voting stock and $50,000 in cash for Chase Corporation's assets having a $200,000 adjusted basis and a $275,000 FMV. Chase Corporation is subsequently liquidated. What is Paper Corporation's basis in the assets acquired in the exchange?

Identify which of the following statements is true.

What are the advantages and disadvantages of a merger transaction?

Advance rulings are required for all reorganizations.

Identify which of the following statements is true.

In a nontaxable reorganization, the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered.

Which one of the following is not a corporate reorganization as defined in the Internal Revenue Code?

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?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is false.

Zebra Corporation transfers assets with a $120,000 basis and a $250,000 FMV to Hat Corporation for common stock worth $200,000 and cash of $50,000. The exchange qualifies as a tax-free reorganization. Zebra Corporation distributes the stock and cash to its shareholders pursuant to its liquidation. How much gain must Zebra Corporation recognize?

Table Corporation transfers one-half of its assets to Chair Corporation in exchange for 100% of Chair Corporation's single class of stock. Following the exchange, Table Corporation distributes the Chair stock ratably to its shareholders. This transaction will constitute a

Type A reorganizations include mergers and consolidations.

The assets of Bold Corporation have a $1,000,000 basis and a $3,000,000 FMV. Its liabilities are $500,000. Tidel Corporation acquires 80% of the Bold Corporation stock for $2,000,000. What gain is recognized by Bold Corporation if a timely Sec. 338 election is made by Tidel Corporation? What is the total basis of the assets to Bold Corporation following the deemed sale? Assume a 34% corporate tax rate.

Town Corporation acquires all of the stock of Country Corporation in June in exchange for Town voting common stock. Both Town and Country use a calendar year as their tax year. In the following January, Country pays all of its liabilities and distributes its remaining assets to Town pursuant to its liquidation. These assets consist of $50,000 in cash and land having a $30,000 FMV and a $10,000 basis to Country. Upon distribution of Country's assets to Town, all of Country's capital stock is canceled. Town's basis for the Country stock prior to the liquidation was $57,000. What is the amount and character of Town's recognized gain on receipt of Country's assets pursuant to the liquidation?

Identify which of the following statements is false.