Question 1

A stock acquisition that is not treated as a purchase for purposes of meeting the Sec. 338 rules is

Accepted Answer

A)  stock whose adjusted basis is determined by its basis in the hands of the person from whom it was acquired. 
B)  stock acquired from a decedent. 
C)  stock acquired in a tax-free reorganization. 
D)  All of the above are correct. 
A)  stock whose adjusted basis is determined by its basis in the hands of the person from whom it was acquired. 
B)  stock acquired from a decedent. 
C)  stock acquired in a tax-free reorganization. 
D)  All of the above are correct.

Question 2

Acquiring Corporation acquires at the close of business on June 30 (of a nonleap year) all of the stock of Target Corporation as part of a merger transaction. Target Corporation is liquidated into Acquiring Corporation on the same day as part of the merger. Acquiring obtains assets having a $600,000 FMV and a $275,000 adjusted basis, along with a $100,000 net operating loss. Acquiring Corporation reports taxable income of $146,000 for the year. What amount of Target Corporation's NOL can be used to offset Acquiring Corporation's taxable income? (Assume all months have 30 days and ignore the Sec. 382 limitation rules.)

Accepted Answer

The lesser of Target's NOL carryover ($1

Question 3

In a nontaxable reorganization, the acquiring corporation has a holding period for the acquired assets that begins on the day after the transaction date.

Accepted Answer

A) True 
 B)False

Question 4

Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock. Stone Corporation distributes the Rock stock to its shareholders pursuant to its liquidation. After the acquisition, Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value). The transaction is classified as a

Accepted Answer

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

Question 5

In a Sec. 338 election, the target corporation

Accepted Answer

A)  will have a holding period for assets beginning on the day after the acquisition date. 
B)  must use the preacquisition tax year. 
C)  will no longer file a separate return. 
D)  is considered to be a continuation of the old target corporation for purposes of the tax attribute carryover rules. 
A)  will have a holding period for assets beginning on the day after the acquisition date. 
B)  must use the preacquisition tax year. 
C)  will no longer file a separate return. 
D)  is considered to be a continuation of the old target corporation for purposes of the tax attribute carryover rules.

Question 6

Identify which of the following statements is true.

Accepted Answer

A)  Depreciation recapture rules do not override the nonrecognition of gain or loss rules. 
B)  The acquisition of liabilities by an acquiring corporation will trigger a gain. 
C)  A target corporation will recognize a gain when it distributes stock to its shareholders. 
D)  The basis of property acquired in a reorganization is its FMV. 
A)  Depreciation recapture rules do not override the nonrecognition of gain or loss rules. 
B)  The acquisition of liabilities by an acquiring corporation will trigger a gain. 
C)  A target corporation will recognize a gain when it distributes stock to its shareholders. 
D)  The basis of property acquired in a reorganization is its FMV.

Question 7

Jersey Corporation purchased 50% of Target Corporation's single class of stock on June 1 of this year. They purchased an additional 40% on November 20 of this year. The Sec. 338 election must be made on or before

Accepted Answer

A)  June 30 of this year. 
B)  November 30 of this year. 
C)  August 15 of next year. 
D)  June 30 of next year. 
A)  June 30 of this year. 
B)  November 30 of this year. 
C)  August 15 of next year. 
D)  June 30 of next year.

Question 8

The acquiring corporation does not recognize gain or loss in a reorganization where it receives boot.

Accepted Answer

A) True 
 B)False

Question 9

Identify which of the following statements is false.

Accepted Answer

A)  Taxable acquisition transactions can either be a purchase of assets or a purchase of stock. 
B)  The tax-free reorganization rules are an example of the wherewithal to pay concept. 
C)  A taxable acquisition of a target corporation's assets results in the nonrecognition of gain or loss on the disposition of each individual asset. 
D)  Sales of depreciable assets as part of a taxable acquisition result in depreciation recapture. 
A)  Taxable acquisition transactions can either be a purchase of assets or a purchase of stock. 
B)  The tax-free reorganization rules are an example of the wherewithal to pay concept. 
C)  A taxable acquisition of a target corporation's assets results in the nonrecognition of gain or loss on the disposition of each individual asset. 
D)  Sales of depreciable assets as part of a taxable acquisition result in depreciation recapture.

Question 10

Identify which of the following statements is true.

Accepted Answer

A)  The acquired corporation in a Type C reorganization may retain its corporation charter. 
B)  Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and $25,000 in cash. Beta is subsequently liquidated. This exchange qualifies as a Type C reorganization. 
C)  Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and the assumption of $25,000 of Beta liabilities. Beta is subsequently liquidated. This exchange does not qualify as a Type C reorganization. 
D)  All of the above are false. 
A)  The acquired corporation in a Type C reorganization may retain its corporation charter. 
B)  Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and $25,000 in cash. Beta is subsequently liquidated. This exchange qualifies as a Type C reorganization. 
C)  Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and the assumption of $25,000 of Beta liabilities. Beta is subsequently liquidated. This exchange does not qualify as a Type C reorganization. 
D)  All of the above are false.

Question 11

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.
Assuming that the adjusted grossed-up basis is $237,000 ($200,000 + $20,000 + $17,000 federal income taxes), what is the allocation of adjusted grossed-up basis to Class VI assets?

Accepted Answer

Adjusted grossed-up basis $237

Question 12

Acquiring Corporation is 100%-owned by Peter Hart. Target Corporation is 100% owned by Dick Weber. The two individuals are not related. Target Corporation has $400,000 of NOL carryovers at the time Acquiring Corporation is considering making a cash acquisition of part or all of Target Corporation's stock. What is the maximum amount of Target stock that can be acquired in a single transaction without the Sec. 382 loss limitation rules applying to the NOLs?

Accepted Answer

A)  49% 
B)  50% 
C)  80% 
D)  Any acquisition of Target stock will cause the Sec. 382 loss limitation to apply. 
A)  49% 
B)  50% 
C)  80% 
D)  Any acquisition of Target stock will cause the Sec. 382 loss limitation to apply.

Question 13

Identify which of the following statements is true.

Accepted Answer

A)  A plan of reorganization must be a written document. 
B)  Advance rulings are required for all reorganizations. 
C)  The IRS will issue an advance ruling on any proposed tax-free reorganization. 
D)  All of the above are false. 
A)  A plan of reorganization must be a written document. 
B)  Advance rulings are required for all reorganizations. 
C)  The IRS will issue an advance ruling on any proposed tax-free reorganization. 
D)  All of the above are false.

Question 14

Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy receives 50 shares of Clipper stock worth $150,000 and $150,000 cash. The remaining 100 shares of Binder stock were owned by Bruce who received the same consideration for his Binder stock. Binder and Clipper have E&P balances of $250,000 and $500,000, respectively. Buddy and Bruce each own 25% of Clipper Corporation's 200 shares of stock after the reorganization. Which of the following is correct?

Accepted Answer

A)  Buddy recognizes $200,000 as dividend income. 
B)  Buddy recognizes $200,000 as a capital gain. 
C)  Buddy recognizes $150,000 as dividend income. 
D)  Buddy recognizes $150,000 as a capital gain. 
A)  Buddy recognizes $200,000 as dividend income. 
B)  Buddy recognizes $200,000 as a capital gain. 
C)  Buddy recognizes $150,000 as dividend income. 
D)  Buddy recognizes $150,000 as a capital gain.

Question 15

What are the two steps of a Sec. 338 deemed liquidation election?

Accepted Answer

First, the target corporation's sharehol

Question 16

Identify which of the following statements is true.

Accepted Answer

A)  A deemed liquidation election is available when a target corporation is liquidated into its parent corporation. 
B)  Corporate purchasers generally prefer Sec. 338 treatment because of the significant tax savings originating from the step-up in basis. 
C)  The Sec. 338 deemed liquidation rules require that 100% of the target corporation's stock be purchased. 
D)  All of the above are false. 
A)  A deemed liquidation election is available when a target corporation is liquidated into its parent corporation. 
B)  Corporate purchasers generally prefer Sec. 338 treatment because of the significant tax savings originating from the step-up in basis. 
C)  The Sec. 338 deemed liquidation rules require that 100% of the target corporation's stock be purchased. 
D)  All of the above are false.

Question 17

The Sec. 338 deemed sale rules require that 70% of the target corporation's stock be owned.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following definitions of Sec. 338 property classes is not correct?

Accepted Answer

A)  Class I: cash, demand deposits, and similar accounts in banks, savings and loan associations, etc. 
B)  Class II: actively traded personal property such as publicly traded securities 
C)  Class III: covenants not to compete, similar restrictions on trade, etc. 
D)  Class IV: inventory or other property held primarily for sale to customers 
A)  Class I: cash, demand deposits, and similar accounts in banks, savings and loan associations, etc. 
B)  Class II: actively traded personal property such as publicly traded securities 
C)  Class III: covenants not to compete, similar restrictions on trade, etc. 
D)  Class IV: inventory or other property held primarily for sale to customers

Question 19

Grand Corporation transfers 40% of its assets having an adjusted basis of $600,000 and an FMV of $800,000 to New Corporation in exchange for 75% of its single class of stock. Grand Corporation is owned equally by Annie and Betsy who are unrelated. Annie's basis for her Grand stock is $300,000 and Betsy's basis is $400,000. Annie exchanges all of her Grand stock for all of the New stock received in the exchange. Which of the following statements is correct concerning these transactions?

Accepted Answer

A)  Grand Corporation does not recognize a gain on the asset transfer to New Corporation or the stock distribution to Annie. 
B)  Annie recognizes a $500,000 capital gain on the exchange of the Grand stock for the New stock. 
C)  Annie's basis in the New stock is $300,000. 
D)  Grand's basis for the New assets is $600,000. 
A)  Grand Corporation does not recognize a gain on the asset transfer to New Corporation or the stock distribution to Annie. 
B)  Annie recognizes a $500,000 capital gain on the exchange of the Grand stock for the New stock. 
C)  Annie's basis in the New stock is $300,000. 
D)  Grand's basis for the New assets is $600,000.

Question 20

Roby Corporation, a Tennessee corporation, decides to change its state of incorporation to Delaware to take advantage of its more favorable state corporation laws. Roby Corporation can take advantage of the Type F reorganization rules by

Accepted Answer

A)  exchanging the Tennessee corporation's assets for the Delaware corporation's stock and liquidating the Tennessee corporation. 
B)  liquidating the Tennessee corporation and reincorporating in Delaware. 
C)  merging the Tennessee corporation stock into an existing Delaware corporation. 
D)  recapitalizing the Tennessee corporation. 
A)  exchanging the Tennessee corporation's assets for the Delaware corporation's stock and liquidating the Tennessee corporation. 
B)  liquidating the Tennessee corporation and reincorporating in Delaware. 
C)  merging the Tennessee corporation stock into an existing Delaware corporation. 
D)  recapitalizing the Tennessee corporation.

A stock acquisition that is not treated as a purchase for purposes of meeting the Sec. 338 rules is

In a nontaxable reorganization, the acquiring corporation has a holding period for the acquired assets that begins on the day after the transaction date.

In a Sec. 338 election, the target corporation

Identify which of the following statements is true.

Jersey Corporation purchased 50% of Target Corporation's single class of stock on June 1 of this year. They purchased an additional 40% on November 20 of this year. The Sec. 338 election must be made on or before

The acquiring corporation does not recognize gain or loss in a reorganization where it receives boot.

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is true.

What are the two steps of a Sec. 338 deemed liquidation election?

Identify which of the following statements is true.

The Sec. 338 deemed sale rules require that 70% of the target corporation's stock be owned.

Which of the following definitions of Sec. 338 property classes is not correct?

Roby Corporation, a Tennessee corporation, decides to change its state of incorporation to Delaware to take advantage of its more favorable state corporation laws. Roby Corporation can take advantage of the Type F reorganization rules by

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The Corporate Income Tax

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Other Corporate Tax Levies

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Exam 7: Corporate Acquisitions and Reorganizations

A stock acquisition that is not treated as a purchase for purposes of meeting the Sec. 338 rules is

In a nontaxable reorganization, the acquiring corporation has a holding period for the acquired assets that begins on the day after the transaction date.

In a Sec. 338 election, the target corporation

Identify which of the following statements is true.

Jersey Corporation purchased 50% of Target Corporation's single class of stock on June 1 of this year. They purchased an additional 40% on November 20 of this year. The Sec. 338 election must be made on or before

The acquiring corporation does not recognize gain or loss in a reorganization where it receives boot.

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is true.

What are the two steps of a Sec. 338 deemed liquidation election?

Identify which of the following statements is true.

The Sec. 338 deemed sale rules require that 70% of the target corporation's stock be owned.

Which of the following definitions of Sec. 338 property classes is not correct?

Roby Corporation, a Tennessee corporation, decides to change its state of incorporation to Delaware to take advantage of its more favorable state corporation laws. Roby Corporation can take advantage of the Type F reorganization rules by

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