Question 1

Identify which of the following statements is true.

Accepted Answer

A)  When boot is received in a Sec. 355 spin- off transaction, the FMV of the boot will be a dividend to the extent of the shareholder's ratable share of the distributing corporation's E&P. 
B)  A tax- free spin- off coming under Sec. 355 occurs when a parent corporation distributes stock in a controlled subsidiary corporation in exchange for some of its own stock. 
C)  Tax- free split- offs and spin- offs coming under Sec. 355 require the surrender of shareholder stock. 
D)  All of the above are false. 
A)  When boot is received in a Sec. 355 spin- off transaction, the FMV of the boot will be a dividend to the extent of the shareholder's ratable share of the distributing corporation's E&P. 
B)  A tax- free spin- off coming under Sec. 355 occurs when a parent corporation distributes stock in a controlled subsidiary corporation in exchange for some of its own stock. 
C)  Tax- free split- offs and spin- offs coming under Sec. 355 require the surrender of shareholder stock. 
D)  All of the above are false.

Question 2

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered, the difference may be

Accepted Answer

A)  a dividend. 
B)  a contribution to capital. 
C)  compensation for services. 
D)  All of the above are correct. 
A)  a dividend. 
B)  a contribution to capital. 
C)  compensation for services. 
D)  All of the above are correct.

Question 3

Identify which of the following statements is false.

Accepted Answer

A)  One advantage of a tax- free reorganization is that losses realized as part of a tax- free reorganization are not recognized. 
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)  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. 
D)  For purposes of Sec. 382, ownership changes are tested any time a 5% shareholder has a stock transaction affecting his ownership. 
A)  One advantage of a tax- free reorganization is that losses realized as part of a tax- free reorganization are not recognized. 
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)  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. 
D)  For purposes of Sec. 382, ownership changes are tested any time a 5% shareholder has a stock transaction affecting his ownership.

Question 4

Brown Corporation has assets with a $650,000 basis and an $800,000 FMV. The assets are subject to $250,000 in liabilities. Clark Corporation acquires all of Brown's assets and liabilities for $600,000 in cash. Brown Corporation then liquidates. What is Clark Corporation's basis in the acquired assets?

Accepted Answer

In a taxable asset acquisition, the purc

Question 5

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?

Accepted Answer

The liquidation may be considered to be

Question 6

Identify which of the following statements is true.

Accepted Answer

A)  Able Corporation (New York) transfers its assets to Able Corporation (Delaware) in exchange for all of its stock. Able Corporation (New York) is liquidated. This exchange is a Type F reorganization. 
B)  A suitable business purpose for a tax- free reorganization is to permit the minimization of shareholder taxes. 
C)  Strict adherence to legislative guidelines with regard to reorganizations is sufficient for tax- free treatment. 
D)  All of the above are false. 
A)  Able Corporation (New York) transfers its assets to Able Corporation (Delaware) in exchange for all of its stock. Able Corporation (New York) is liquidated. This exchange is a Type F reorganization. 
B)  A suitable business purpose for a tax- free reorganization is to permit the minimization of shareholder taxes. 
C)  Strict adherence to legislative guidelines with regard to reorganizations is sufficient for tax- free treatment. 
D)  All of the above are false.

Question 7

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

Accepted Answer

A)  $500,000. 
B)  $300,000. 
C)  $800,000. 
D)  $600,000. 
A)  $500,000. 
B)  $300,000. 
C)  $800,000. 
D)  $600,000.

Question 8

Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000. The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation. Frank's basis in the Baxter stock he surrenders is $120,000. What is Frank's basis in the Duke stock he receives?

Accepted Answer

The correct answer is $120,000

Question 9

Identify which of the following statements is true.

Accepted Answer

A)  In tax- free reorganizations, one transaction cannot qualify for more than one type of tax- free reorganization. 
B)  The target corporation in a tax- free reorganization generally recognizes no gain or loss when boot property is received in exchange for assets because such property is usually distributed to its shareholders and creditors when the target corporation is liquidated. 
C)  The Sec. 1245 recapture rules override the nonrecognition of gain or loss rules for an asset- for- stock tax- free reorganization. 
D)  All of the above are false. 
A)  In tax- free reorganizations, one transaction cannot qualify for more than one type of tax- free reorganization. 
B)  The target corporation in a tax- free reorganization generally recognizes no gain or loss when boot property is received in exchange for assets because such property is usually distributed to its shareholders and creditors when the target corporation is liquidated. 
C)  The Sec. 1245 recapture rules override the nonrecognition of gain or loss rules for an asset- for- stock tax- free reorganization. 
D)  All of the above are false.

Question 10

As part of a plan of corporate reorganization, Sally exchanged 1,000 shares of Tone Corporation common stock that she had purchased for $85,000, for 3,000 shares of Fade Corporation voting common stock having an
$87,000 FMV. What is the amount and character of Sally's recognized gain and her basis in the Tone stock as a result of the exchange?

Accepted Answer

Her realized gain is $2,000 ($87,000 - $

Question 11

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

Question 12

Shareholders in Boxer Corporation exchange all of their nonvoting Class B common stock for additional shares of Boxer's Class A common stock. Which of the following statements is correct?

Accepted Answer

A)  The basis of the Class A common stock received is equal to its FMV. 
B)  The exchange is tax- free even if no plan of reorganization has been created. 
C)  The exchange is a Type F reorganization, assuming all requirements are met. 
D)  If boot is added to the exchange, the entire gain realized on the exchange is recognized in full. 
A)  The basis of the Class A common stock received is equal to its FMV. 
B)  The exchange is tax- free even if no plan of reorganization has been created. 
C)  The exchange is a Type F reorganization, assuming all requirements are met. 
D)  If boot is added to the exchange, the entire gain realized on the exchange is recognized in full.

Question 13

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 14

Identify which of the following statements is true.

Accepted Answer

A)  In a tax- free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation. 
B)  In a tax- free reorganization, the acquiring corporation's holding period for the acquired properties includes the period of time the target corporation held the properties. 
C)  The receipt of cash by a shareholder results in the recognition of all of his or her realized gain even if the transaction qualifies as a tax- free reorganization. 
D)  All of the above are false. 
A)  In a tax- free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation. 
B)  In a tax- free reorganization, the acquiring corporation's holding period for the acquired properties includes the period of time the target corporation held the properties. 
C)  The receipt of cash by a shareholder results in the recognition of all of his or her realized gain even if the transaction qualifies as a tax- free reorganization. 
D)  All of the above are false.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Johnson Co. transferred part of its assets to Alive Corporation in exchange for all of Alive's stock. The Alive stock received for the assets was distributed to the Johnson shareholders. What tax issues should the parties to the divisive reorganization consider?

Accepted Answer

The following points should be addressed

Question 17

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 18

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

Question 19

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

Question 20

Why would an acquiring corporation want an acquisition to be tax- free if it gets only a substituted basis rather than a step- up basis for the acquired assets?

Accepted Answer

Although the motivation for the tax- fre

Identify which of the following statements is true.

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered, the difference may be

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is true.

Shareholders in Boxer Corporation exchange all of their nonvoting Class B common stock for additional shares of Boxer's Class A common stock. Which of the following statements is correct?

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

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.

Johnson Co. transferred part of its assets to Alive Corporation in exchange for all of Alive's stock. The Alive stock received for the assets was distributed to the Johnson shareholders. What tax issues should the parties to the divisive reorganization consider?

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

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

In a Sec. 338 election, the target corporation

Why would an acquiring corporation want an acquisition to be tax- free if it gets only a substituted basis rather than a step- up basis for the acquired assets?

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

U.S. Taxation of Foreign-Related Transactions

Filters

Exam 7: Corporate Acquisitions and Reorganizations

Identify which of the following statements is true.

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered, the difference may be

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is true.

Shareholders in Boxer Corporation exchange all of their nonvoting Class B common stock for additional shares of Boxer's Class A common stock. Which of the following statements is correct?

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

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.

Johnson Co. transferred part of its assets to Alive Corporation in exchange for all of Alive's stock. The Alive stock received for the assets was distributed to the Johnson shareholders. What tax issues should the parties to the divisive reorganization consider?

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

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

In a Sec. 338 election, the target corporation

Why would an acquiring corporation want an acquisition to be tax- free if it gets only a substituted basis rather than a step- up basis for the acquired assets?

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

U.S. Taxation of Foreign-Related Transactions

Filters