Question 1

Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

Accepted Answer

A)  Depreciation of the property by the buyer. 
B)  Selling expenses incurred by the buyer. 
C)  Acquisition cost of the buyer. 
D)  Capital improvements made to the property by the buyer. 
A)  Depreciation of the property by the buyer. 
B)  Selling expenses incurred by the buyer. 
C)  Acquisition cost of the buyer. 
D)  Capital improvements made to the property by the buyer.

Question 2

In December 2017, Jill incurred a $50,000 loss on the sale of Crown Corporation stock that shepurchased in 2010. The stock satisfied all of the §1244 stock requirements at the time of issue. Jill is married to Jack and together they file a joint tax return. How much of the loss can Jack and Jilldeduct in 2017, assuming they do not have capital gains in the current or prior years, and what is thecharacter of the loss?

Accepted Answer

$50,000 ordinary loss
§1244 li

Question 3

A liquidated corporation will always recognize loss in a complete liquidation where none of the shareholders is a corporation.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Accepted Answer

A)  Boot received has no impact on the recognition of gain or loss realized in a section 351 transaction. 
B)  Boot received causes gain and loss realized to be recognized. 
C)  Boot received causes loss realized to be recognized, but not gain realized. 
D)  Boot received causes gain realized to be recognized, but not loss realized. 
A)  Boot received has no impact on the recognition of gain or loss realized in a section 351 transaction. 
B)  Boot received causes gain and loss realized to be recognized. 
C)  Boot received causes loss realized to be recognized, but not gain realized. 
D)  Boot received causes gain realized to be recognized, but not loss realized.

Question 5

Katarina transferred her 10 percent interest to Spartan Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $200,000. Katarina's basis in the Spartan stock was $100,000. The land had a basis to Spartan Company of $50,000. What amount of gain does Spartan recognize in theexchange and what is Katarina's basis in the land she receives?

Accepted Answer

A)  No gain recognized by Spartan and a basis in the land of $50,000 to Katarina. 
B)  $150,000 gain recognized by Spartan and a basis in the land of $200,000 to Katarina. 
C)  No gain recognized by Spartan and a basis in the land of $100,000 to Katarina. 
D)  $100,000 gain recognized by Spartan and a basis in the land of $200,000 to Katarina. 
A)  No gain recognized by Spartan and a basis in the land of $50,000 to Katarina. 
B)  $150,000 gain recognized by Spartan and a basis in the land of $200,000 to Katarina. 
C)  No gain recognized by Spartan and a basis in the land of $100,000 to Katarina. 
D)  $100,000 gain recognized by Spartan and a basis in the land of $200,000 to Katarina.

Question 6

Which of the following statements best describes the requirement that must be met in a tax-deferred Type B stock-for-stock reorganization?

Accepted Answer

A)  The acquiring corporation must hold substantially all of the target's properties after the acquisition. 
B)  The target corporation shareholders must receive "solely" voting stock in the acquiring corporation in the exchange. 
C)  The target corporation shareholders must receive voting stock in the acquiring corporation in exchange for 60 percent or more of the target corporation stock. 
D)  The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target shareholders. 
A)  The acquiring corporation must hold substantially all of the target's properties after the acquisition. 
B)  The target corporation shareholders must receive "solely" voting stock in the acquiring corporation in the exchange. 
C)  The target corporation shareholders must receive voting stock in the acquiring corporation in exchange for 60 percent or more of the target corporation stock. 
D)  The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target shareholders.

Question 7

Mike and Michelle decided to liquidate their jointly owned corporation, Pennsylvania Corporation. Afterliquidating its remaining inventory and paying off its remaining liabilities, Pennsylvania had the following tax accounting balance sheet.   Under the terms of the agreement, Mike will receive the $200,000 cash in exchange for his 40 percent interest in Pennsylvania. Mike's tax basis in his Pennsylvania stock is $50,000. Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania. Her tax basis in the Pennsylvania stock is$100,000.What amount of gain or loss does Pennsylvania recognize in the complete liquidation?

Accepted Answer

Pennsylvania has a taxable transaction a

Question 8

Jamie transferred 100 percent of her stock in Fox Company to Otter Corporation in aType A merger. In exchange, she received stock in Otter with a fair market value of$400,000 plus $600,000 in cash. Jamie's tax basis in the Fox stock was $600,000. What amount of gain does Jamie recognize in the exchange and what is her basis in the Otter stock she receives?

Accepted Answer

A)  $600,000 gain recognized and a basis in Otter stock of $600,000. 
B)  $400,000 gain recognized and a basis in Otter stock of $400,000. 
C)  $600,000 gain recognized and a basis in Otter stock of $400,000. 
D)  $400,000 gain recognized and a basis in Otter stock of $600,000. 
A)  $600,000 gain recognized and a basis in Otter stock of $600,000. 
B)  $400,000 gain recognized and a basis in Otter stock of $400,000. 
C)  $600,000 gain recognized and a basis in Otter stock of $400,000. 
D)  $400,000 gain recognized and a basis in Otter stock of $600,000.

Question 9

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. In all cases, the assumed liability will be treated as boot received by Jane.

Accepted Answer

A) True 
 B)False

Question 10

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in atransaction.

Accepted Answer

A) True 
 B)False

Question 11

In December 2017, Zeb incurred a $100,000 loss on the sale of Pike Corporation stock that he purchased in 2010. The stock satisfied all of the §1244 stock requirements at the time of issue. In addition, Zeb reported a long-term capital gain of $40,000 in 2017. Zeb is single. How much of the loss can Zeb deduct in 2017, and what is the character of the loss?

Accepted Answer

$50,000 ordinary loss under §1244, $40,0

Question 12

Robin transferred her 60 percent interest to Cardinal Company as part of a completeliquidation of the company. In the exchange, she received land with a fair market value of $800,000. Robin's basis in the Cardinal stock was $900,000. The land had a basis to Cardinal Company of $1,000,000. What amount of loss does Cardinal recognize in the exchange and what is Robin's basis in the land she receives? The distribution was non pro rata to Robin, a related person.

Accepted Answer

A)  No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
B)  No loss recognized by Cardinal and a basis in the land of $800,000 to Robin. 
C)  $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
D)  $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin. 
A)  No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
B)  No loss recognized by Cardinal and a basis in the land of $800,000 to Robin. 
C)  $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
D)  $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin.

Question 13

Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, Red Blossom received land with a fair market value of $500,000. The corporation's basis in the Tea Company stock was$300,000. The land had a basis to Tea Company of $600,000. What amount of gain doesRed Blossom recognize in the exchange and what is its basis in the land it receives?

Accepted Answer

A)  No gain recognized and a basis in the land of $600,000. 
B)  $200,000 gain recognized and a basis in the land of $500,000. 
C)  No gain recognized and a basis in the land of $300,000. 
D)  $200,000 gain recognized and a basis in the land of $600,000. 
A)  No gain recognized and a basis in the land of $600,000. 
B)  $200,000 gain recognized and a basis in the land of $500,000. 
C)  No gain recognized and a basis in the land of $300,000. 
D)  $200,000 gain recognized and a basis in the land of $600,000.

Question 14

Don and Marie formed Paper Lilies Corporation on January 2. Don contributed cash of $400,000 in return for50 percent of the corporation's stock. Marie contributed a building and land with the following fair market values and tax-adjusted bases in return for 50 percent of the corporation's stock.   To equalize the exchange, Paper Lilies Corporation paid Marie $50,000 in addition to her stock. a. What amount of gain or loss does Marie realize on the formation of the corporation?b. What amount of gain or loss, if any, does she recognize?c. What is Marie's tax basis in the stock she receives in return for her contribution of property to the corporation?d. What adjusted basis does Paper Lilies Corporation take in the land and building received from Marie?

Accepted Answer

a. $250,000 gain realized b. $50,000 gai

Question 15

Keegan incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases.   The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Keegan.Assuming the gain or loss realized in this problem is deferred under §351, what is Keegan's basis in the stock he receives in his corporation?

Accepted Answer

$164,000
The stock t

Question 16

Which of the following requirements do not have to be met in a section 351 transaction?

Accepted Answer

A)  Each transferor of property must receive stock equal to at least 80 percent of the fair market value of the property transferred. 
B)  Only property transferred to a corporation is eligible for deferral. 
C)  In the aggregate, the transferors of property to the corporation must collectively control the corporation immediately after the transfers. 
D)  All transfers of property to a corporation must be made simultaneously to qualify for deferral. 
A)  Each transferor of property must receive stock equal to at least 80 percent of the fair market value of the property transferred. 
B)  Only property transferred to a corporation is eligible for deferral. 
C)  In the aggregate, the transferors of property to the corporation must collectively control the corporation immediately after the transfers. 
D)  All transfers of property to a corporation must be made simultaneously to qualify for deferral.

Question 17

The City of Boston made a capital contribution of land to Fenway Company as an inducement to the company to build a manufacturing plant in the city. Boston paid $600,000 for the land several years ago and it currently has a fair market value of $1,000,000. What is the tax basis of the land toFenway Company?

Accepted Answer

Zero.
Contributions

Question 18

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

Accepted Answer

A)  Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. 
B)  Gain and loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. 
C)  Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. 
D)  Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code. 
A)  Gain realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. 
B)  Gain and loss realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. 
C)  Loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code, but gain realized is not recognized unless specifically stated otherwise in the Internal Revenue Code. 
D)  Gain and loss realized is recognized unless specifically stated otherwise in the Internal Revenue Code.

Question 19

Roberta transfers property with a tax basis of $400 and a fair market value of $500 to a corporation in exchange for stock with a fair market value of $350 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $150 on the property transferred. What is the amount realized by Roberta in the exchange?

Accepted Answer

A)  $400. 
B)  $250. 
C)  $350. 
D)  $500. 
A)  $400. 
B)  $250. 
C)  $350. 
D)  $500.

Question 20

Billie transferred her 20 percent interest to Jean Company as part of a completeliquidation of the company. In the exchange, she received land with a fair market value of $200,000. Billie's basis in the Jean stock was $100,000. The land had a basis to Jean Company of $400,000. What amount of loss does Jean recognize in the exchange and what is Billie's basis in the land she receives? Billie is not considered a related party to Jean Company.

Accepted Answer

A)  No loss recognized by Jean and a basis in the land of $400,000 to Billie. 
B)  $200,000 loss recognized by Jean and a basis in the land of $200,000 to Billie. 
C)  No loss recognized by Jean and a basis in the land of $200,000 to Billie. 
D)  $200,000 loss recognized by Jean and a basis in the land of $400,000 to Billie. 
A)  No loss recognized by Jean and a basis in the land of $400,000 to Billie. 
B)  $200,000 loss recognized by Jean and a basis in the land of $200,000 to Billie. 
C)  No loss recognized by Jean and a basis in the land of $200,000 to Billie. 
D)  $200,000 loss recognized by Jean and a basis in the land of $400,000 to Billie.

Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

A liquidated corporation will always recognize loss in a complete liquidation where none of the shareholders is a corporation.

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Which of the following statements best describes the requirement that must be met in a tax-deferred Type B stock-for-stock reorganization?

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. In all cases, the assumed liability will be treated as boot received by Jane.

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in atransaction.

Which of the following requirements do not have to be met in a section 351 transaction?

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 19: Corporate Formation, Reorganization, and Liquidation

Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

A liquidated corporation will always recognize loss in a complete liquidation where none of the shareholders is a corporation.

Which of the following statements best describes the impact of receiving boot in a section 351 transaction?

Which of the following statements best describes the requirement that must be met in a tax-deferred Type B stock-for-stock reorganization?

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. In all cases, the assumed liability will be treated as boot received by Jane.

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in atransaction.

Which of the following requirements do not have to be met in a section 351 transaction?

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters