Question 1

Tax attributes of the target corporation are lost when a Sec.338 deemed liquidation election is made.

Accepted Answer

A) True 
 B)False

Question 2

Identify which of the following statements is true.

Accepted Answer

A) A Type B reorganization must be accomplished in one transaction. 
B) "Creeping acquisitions" are not allowed in a Type B reorganization. 
C) Boxer Corporation acquires 81% of Excel Corporation's stock in a Type B reorganization.When Boxer Corporation acquires an additional 11% of Excel Corporation's stock two years later in exchange for Boxer stock,the second acquisition is also treated as a Type B reorganization. 
D) All of the above are false. 
A) A Type B reorganization must be accomplished in one transaction. 
B) "Creeping acquisitions" are not allowed in a Type B reorganization. 
C) Boxer Corporation acquires 81% of Excel Corporation's stock in a Type B reorganization.When Boxer Corporation acquires an additional 11% of Excel Corporation's stock two years later in exchange for Boxer stock,the second acquisition is also treated as a Type B reorganization. 
D) All of the above are false.

Question 3

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.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

In a taxable asset acquisition,the purchaser does not acquire unknown and contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 6

Midnight Corporation transferred part of its assets to Noon Corporation in exchange for all of Noon's stock.Midnight distributed all of Noon's stock pro rate to Midnight's shareholders.What is this type of reorganization?

Accepted Answer

A) split-off 
B) spin-off 
C) split-up 
D) dividend distribution 
A) split-off 
B) spin-off 
C) split-up 
D) dividend distribution

Question 7

Identify which of the following statements is true.

Accepted Answer

A) Both a Type B reorganization or a reverse triangular merger will not allow the target corporation to remain in existence. 
B) Andrews Corporation gives 10% of its stock worth $200,000 and Andrews notes worth $10,000 in exchange for 80% of Baxter Corporation's stock.The exchange qualifies as a Type B reorganization. 
C) In a Type B reorganization,with minor exceptions,only voting stock can be used by the acquiring corporation to acquire the target corporation's stock. 
D) All of the above are false. 
A) Both a Type B reorganization or a reverse triangular merger will not allow the target corporation to remain in existence. 
B) Andrews Corporation gives 10% of its stock worth $200,000 and Andrews notes worth $10,000 in exchange for 80% of Baxter Corporation's stock.The exchange qualifies as a Type B reorganization. 
C) In a Type B reorganization,with minor exceptions,only voting stock can be used by the acquiring corporation to acquire the target corporation's stock. 
D) All of the above are false.

Question 8

Identify which of the following statements is false.

Accepted Answer

A) When determining the use of an NOL carryover following a change of ownership,the old loss corporation and the new loss corporation may be the same for Sec.382 purposes. 
B) A new loss corporation that does not continue the business enterprise of the old loss corporation during the two-year period beginning on the date of the stock ownership change cannot use the net operating loss carryover. 
C) One advantage of a tax-free reorganization is that losses realized as part of a tax-free reorganization are not recognized. 
D) For purposes of Sec.382,ownership changes are tested any time a 5% shareholder has a stock transaction affecting his ownership. 
A) When determining the use of an NOL carryover following a change of ownership,the old loss corporation and the new loss corporation may be the same for Sec.382 purposes. 
B) A new loss corporation that does not continue the business enterprise of the old loss corporation during the two-year period beginning on the date of the stock ownership change cannot use the net operating loss carryover. 
C) One advantage of a tax-free reorganization is that losses realized as part of a tax-free reorganization are not recognized. 
D) For purposes of Sec.382,ownership changes are tested any time a 5% shareholder has a stock transaction affecting his ownership.

Question 9

A Type C reorganization is a change in identity,legal form,or state of incorporation in which the shareholders retain the same equity interest.

Accepted Answer

A) True 
 B)False

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.Barbara's basis for her Acme securities is

Accepted Answer

A) 0) 
B) $200,000. 
C) $350,000. 
D) $400,000. 
A) 0) 
B) $200,000. 
C) $350,000. 
D) $400,000.

Question 11

Identify which of the following statements is true.

Accepted Answer

A) The total basis of the target corporation's assets following a Sec.338 election in general equals the amount paid for the target corporation's stock minus the target corporation's liabilities. 
B) The residual method ensures that any premium paid for the target stock is reflected in depreciable assets. 
C) The allocation of the total basis of the target corporation's assets to the individual assets following a Sec.338 election occurs under the residual method. 
D) All of the above are false. 
A) The total basis of the target corporation's assets following a Sec.338 election in general equals the amount paid for the target corporation's stock minus the target corporation's liabilities. 
B) The residual method ensures that any premium paid for the target stock is reflected in depreciable assets. 
C) The allocation of the total basis of the target corporation's assets to the individual assets following a Sec.338 election occurs under the residual method. 
D) All of the above are false.

Question 12

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.

Exam 7: Corporate Acquisitions and Reorganizations

Tax attributes of the target corporation are lost when a Sec.338 deemed liquidation election is made.

Identify which of the following statements is true.

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.

In a taxable asset acquisition,the purchaser does not acquire unknown and contingent liabilities.

Midnight Corporation transferred part of its assets to Noon Corporation in exchange for all of Noon's stock.Midnight distributed all of Noon's stock pro rate to Midnight's shareholders.What is this type of reorganization?

Identify which of the following statements is true.

Identify which of the following statements is false.

A Type C reorganization is a change in identity,legal form,or state of incorporation in which the shareholders retain the same equity interest.

Identify which of the following statements is true.

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?

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