Question 1

A sole proprietor is required to use the same reporting period for both business and individual tax information.

Accepted Answer

A) True 
 B)False

Question 2

Identify which of the following statements is true.

Accepted Answer

A)  The transferor must recapture depreciation when exchanging Sec. 1245 property in all transactions coming under Sec. 351. 
B)  A corporation receiving property in a Sec. 351 exchange can select any MACRS depreciation method for the asset. 
C)  When depreciable property is transferred to a corporation in a Sec. 351 exchange in which no gain is recognized, the corporation must continue to use the transferor's depreciation method and recovery period for the property. 
D)  All of the above are false. 
A)  The transferor must recapture depreciation when exchanging Sec. 1245 property in all transactions coming under Sec. 351. 
B)  A corporation receiving property in a Sec. 351 exchange can select any MACRS depreciation method for the asset. 
C)  When depreciable property is transferred to a corporation in a Sec. 351 exchange in which no gain is recognized, the corporation must continue to use the transferor's depreciation method and recovery period for the property. 
D)  All of the above are false.

Question 3

S corporations are flow-through entities in which S income is allocated to shareholders.

Accepted Answer

A) True 
 B)False

Question 4

Jeremy operates a business as a sole proprietorship. The proprietorship uses the cash method of accounting. He decides to incorporate and transfers the assets and liabilities of the sole proprietorship to the newly formed corporation in exchange for its stock. The assets, which include $10,000 of accounts receivable with a zero basis, have a basis of $20,000 and an FMV of $40,000. The liabilities include accounts payable of $12,000, which will be deductible when paid, and a note payable on medical equipment of $7,000. Jeremy's basis for his stock is

Accepted Answer

A)  $40,000. 
B)  $20,000. 
C)  $13,000. 
D)  $8,000. 
A)  $40,000. 
B)  $20,000. 
C)  $13,000. 
D)  $8,000.

Question 5

Barry, Dan, and Edith together form a new corporation; Barry and Dan each contribute property in exchange for stock. Within two weeks after the formation, the corporation issues additional stock to Edith in exchange for property. Barry and Dan each hold 10,000 shares and Edith will receive 9,000 shares. Which transactions will qualify for nonrecognition?

Accepted Answer

A)  Only the first transaction will qualify for nonrecognition. 
B)  Only the second transaction will qualify for nonrecognition. 
C)  Because of the step transaction doctrine, neither transaction will qualify. 
D)  Both transactions will qualify under Sec. 351 if they are part of the same plan of incorporation. 
A)  Only the first transaction will qualify for nonrecognition. 
B)  Only the second transaction will qualify for nonrecognition. 
C)  Because of the step transaction doctrine, neither transaction will qualify. 
D)  Both transactions will qualify under Sec. 351 if they are part of the same plan of incorporation.

Question 6

The transferee corporation's basis in property received in a Sec. 351 exchange is

Accepted Answer

A)  the FMV of the property received. 
B)  the transferee corporation's basis in the stock exchanged. 
C)  the transferor's basis for the property plus gain recognized by the transferor. 
D)  the transferor's basis for the property plus gain recognized by the transferee corporation. 
A)  the FMV of the property received. 
B)  the transferee corporation's basis in the stock exchanged. 
C)  the transferor's basis for the property plus gain recognized by the transferor. 
D)  the transferor's basis for the property plus gain recognized by the transferee corporation.

Question 7

Henry transfers property with an adjusted basis of $95,000 and an FMV of $100,000 to a newly formed corporation in a Sec. 351 exchange. Henry receives stock with an FMV of $85,000 and a short-term note with a $15,000 FMV. Henry's basis in the stock is

Accepted Answer

A)  $100,000. 
B)  $95,000. 
C)  $90,000. 
D)  $85,000. 
A)  $100,000. 
B)  $95,000. 
C)  $90,000. 
D)  $85,000.

Question 8

Identify which of the following statements is true.

Accepted Answer

A)  Regular corporation and C corporation are synonymous terms. 
B)  Regular corporation and S corporation are synonymous terms. 
C)  A partner is generally considered to be an employee of the partnership. 
D)  All of the above are false. 
A)  Regular corporation and C corporation are synonymous terms. 
B)  Regular corporation and S corporation are synonymous terms. 
C)  A partner is generally considered to be an employee of the partnership. 
D)  All of the above are false.

Question 9

Zoe Ann transfers machinery having a $36,000 adjusted basis and a $70,000 FMV for all 100 shares of Zeema Corporation's stock. Before the transfer, Zoe Ann used the machinery in her business. She originally paid $50,000 for the machinery and claimed $14,000 of depreciation before transferring the machinery. Zoe Ann recaptures no depreciation on the transfer and the recapture potential is transferred to Zeema Corporation. Zeema sells the machine for $66,000 after it had depreciated the machine an additional $4,000. What is Zeema's gain on the machine and what is its character?

Accepted Answer

Zeema must recognize a $34,000

Question 10

Which of the following statements is true?

Accepted Answer

A)  Shareholders in a C corporation can use C corporation losses to offset shareholder income from other sources. 
B)  C corporation losses remain in the C corporation and can offset capital gain income from other years. 
C)  C corporation shareholders are taxed based on their proportionate share of income. 
D)  Distributions of C corporation income are not taxable. 
A)  Shareholders in a C corporation can use C corporation losses to offset shareholder income from other sources. 
B)  C corporation losses remain in the C corporation and can offset capital gain income from other years. 
C)  C corporation shareholders are taxed based on their proportionate share of income. 
D)  Distributions of C corporation income are not taxable.

Question 11

A corporation must recognize a loss when transferring noncash boot property that has declined in value and its stock to a transferor as part of a Sec. 351 exchange.

Accepted Answer

A) True 
 B)False

Question 12

What is the impact on a transferor if a Sec. 351 exchange involves the assumption of the shareholder's liabilities by the corporation?

Accepted Answer

The general rule is that the assumption

Question 13

Discuss the IRS reporting requirements under Sec. 351.

Accepted Answer

Both the transferor-shareholders and the

Question 14

Discuss the impact of the contribution of cash as part of a Sec. 351 exchange.

Accepted Answer

Cash is treated as property when it is c

Question 15

Under Sec. 351, corporate stock may include all of the following except

Accepted Answer

A)  voting stock. 
B)  nonvoting stock. 
C)  stock warrants. 
D)  qualified preferred stock. 
A)  voting stock. 
B)  nonvoting stock. 
C)  stock warrants. 
D)  qualified preferred stock.

Question 16

A shareholder's basis in stock received in a Sec. 351 transaction is

Accepted Answer

A)  increased by the gain recognized by the corporation. 
B)  decreased by the gain recognized by the transferor. 
C)  decreased by liabilities assumed by the corporation. 
D)  increased by the FMV of boot received from the corporation. 
A)  increased by the gain recognized by the corporation. 
B)  decreased by the gain recognized by the transferor. 
C)  decreased by liabilities assumed by the corporation. 
D)  increased by the FMV of boot received from the corporation.

Question 17

Maria has been operating a business as a sole proprietorship for several years. She needs additional capital and wants to incorporate her business. The assets of her business (building, land, inventory, and so on) have a $400,000 adjusted basis and a $1.5 million FMV. Maria is willing to exchange the assets for 1,500 shares of Metro Corporation stock, each having a $1,000 FMV. Bill and John are each willing to invest $500,000 in Maria's business and will each receive 500 shares of stock. Why is Sec. 351 important to Maria? Does it matter to Bill and John?

Accepted Answer

If not for Sec. 351, Maria would recogni

Question 18

The assignment of income doctrine does not apply if the transferor in a Sec. 351 exchange in which no gain is otherwise recognized transfers substantially all the assets and liabilities of the transferor's trade or business to the controlled corporation.

Accepted Answer

A) True 
 B)False

Question 19

Dan transfers property with an adjusted basis of $50,000 and an FMV of $100,000 to a newly formed Sun Corporation in exchange for 500 shares of Sun stock, which is one-half of the outstanding Sun stock. His daughter, Sylvia, transfers property with an adjusted basis of $25,000 and an FMV of $50,000 for the other 500 shares at the same time. What are the tax consequences of the two transfers, assuming all the requirements of Sec. 351 are met?

Accepted Answer

No gain or loss is recognized by either

Question 20

There are no tax consequences of a partnership converting to a C corporation.

Accepted Answer

A) True 
 B)False

A sole proprietor is required to use the same reporting period for both business and individual tax information.

Identify which of the following statements is true.

S corporations are flow-through entities in which S income is allocated to shareholders.

The transferee corporation's basis in property received in a Sec. 351 exchange is

Henry transfers property with an adjusted basis of $95,000 and an FMV of $100,000 to a newly formed corporation in a Sec. 351 exchange. Henry receives stock with an FMV of $85,000 and a short-term note with a $15,000 FMV. Henry's basis in the stock is

Identify which of the following statements is true.

Which of the following statements is true?

A corporation must recognize a loss when transferring noncash boot property that has declined in value and its stock to a transferor as part of a Sec. 351 exchange.

What is the impact on a transferor if a Sec. 351 exchange involves the assumption of the shareholder's liabilities by the corporation?

Discuss the IRS reporting requirements under Sec. 351.

Discuss the impact of the contribution of cash as part of a Sec. 351 exchange.

Under Sec. 351, corporate stock may include all of the following except

A shareholder's basis in stock received in a Sec. 351 transaction is

The assignment of income doctrine does not apply if the transferor in a Sec. 351 exchange in which no gain is otherwise recognized transfers substantially all the assets and liabilities of the transferor's trade or business to the controlled corporation.

There are no tax consequences of a partnership converting to a C corporation.

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

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

Exam 2: Corporate Formations and Capital Structure

A sole proprietor is required to use the same reporting period for both business and individual tax information.

Identify which of the following statements is true.

S corporations are flow-through entities in which S income is allocated to shareholders.

The transferee corporation's basis in property received in a Sec. 351 exchange is

Henry transfers property with an adjusted basis of $95,000 and an FMV of $100,000 to a newly formed corporation in a Sec. 351 exchange. Henry receives stock with an FMV of $85,000 and a short-term note with a $15,000 FMV. Henry's basis in the stock is

Identify which of the following statements is true.

Which of the following statements is true?

A corporation must recognize a loss when transferring noncash boot property that has declined in value and its stock to a transferor as part of a Sec. 351 exchange.

What is the impact on a transferor if a Sec. 351 exchange involves the assumption of the shareholder's liabilities by the corporation?

Discuss the IRS reporting requirements under Sec. 351.

Discuss the impact of the contribution of cash as part of a Sec. 351 exchange.

Under Sec. 351, corporate stock may include all of the following except

A shareholder's basis in stock received in a Sec. 351 transaction is

The assignment of income doctrine does not apply if the transferor in a Sec. 351 exchange in which no gain is otherwise recognized transfers substantially all the assets and liabilities of the transferor's trade or business to the controlled corporation.

There are no tax consequences of a partnership converting to a C corporation.

Tax Research

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

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