Exam 7: Corporate Acquisitions and Reorganizations

Paris Corporation has E&P of $200,000. Paris owns all of Slider Corporation's stock, which is worth $80,000. The stock has been held for five years. Paris distributes all of the Slider stock and $20,000 cash to a 50% shareholder in exchange for all of the shareholder's 100 shares of Paris stock. The exchange qualifies as a Sec. 355 split- off transaction. The 50% shareholder's basis in the Paris stock surrendered is $90,000. What is the amount of the gain that the 50% shareholder must recognize?

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

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

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

Marty is a party to a tax- free reorganization. He has a basis of $22,000 in his Van Corporation stock that has an FMV of $35,000. Marty exchanges the Van stock for Young Corporation stock worth $29,000 and Young securities with a face amount of $7,000 and an FMV of $6,000. What is Marty's basis in the Young securities?

Define the seven classes of assets used in allocating basis when using the residual method.

Identify which of the following statements is false.

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?

When gain is realized by a target corporation from disposing of its assets in a tax- free reorganization, the gain is

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

Discuss the advantages and disadvantages of a tax- free reorganization as compared with a taxable transaction.

Identify which of the following statements is true.

Identify which of the following statements is true.

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.

Martha owns Gator Corporation stock having an adjusted basis of $21,000. As part of a tax- free reorganization involving Gator and Baker Corporations, Martha exchanges her Gator stock for $18,000 of Baker stock and $6,000 (face amount and FMV) of Baker securities. What is Martha's basis in the Baker stock?

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?

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

Identify which of the following statements is true.

Rocky is a party to a tax- free asset- for- stock reorganization. As part of the transaction, Rocky exchanges 100% of the Hope Corporation stock with a $40,000 basis and a $50,000 FMV for Moth Corporation stock worth $40,000 and $10,000 cash. Hope Corporation is subsequently liquidated as part of the reorganization, with Moth receiving the Hope assets and liabilities. Rocky is