Question 1

Which of the following statements does not describe a requirement that must be met in a tax-deferred reverse triangular merger?

Accepted Answer

A) The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target corporation shareholders. 
B) The target must hold substantially all of the target corporation's properties and the properties of the acquisition subsidiary after the merger. 
C) The continuity of business enterprise test must be met with respect to the target corporation. 
D) The target corporation shareholders must receive voting stock in the acquiring corporation. 
A) The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target corporation shareholders. 
B) The target must hold substantially all of the target corporation's properties and the properties of the acquisition subsidiary after the merger. 
C) The continuity of business enterprise test must be met with respect to the target corporation. 
D) The target corporation shareholders must receive voting stock in the acquiring corporation.

Question 2

Amy transfers property with a tax basis of $1,455 and a fair market value of $1,095 to a corporation in exchange for stock with a fair market value of $850 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $245 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

Accepted Answer

A) $1,455 
B) $1,210 
C) $1,110 
D) $850 
A) $1,455 
B) $1,210 
C) $1,110 
D) $850

Question 3

Which of the following statements about §351 transactions is false?

Accepted Answer

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

Question 4

April transferred 100 percent of her stock in June Company to March Corporation in a taxable merger. In exchange she received stock in March with a fair market value of $400,000 plus $1,200,000 in cash. April's tax basis in the June stock was $2,000,000. What amount of loss does April recognize in the exchange and what is her basis in the March stock she receives?

Accepted Answer

$400,000 capital loss. Her basis in the

Question 5

Francine incorporated her 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 corporation also assumed a mortgage of $66,500 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $217,500.
a. What amount of gain or loss does Francine realize on the transfer of the property to her corporation?
b. What amount of gain or loss does Francine recognize on the transfer of the property to her corporation?
c. What is Francine's basis in the stock she receives in her corporation?

Accepted Answer

a.
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Question 6

The shareholders in the target corporation always receive a tax basis in the stock received from the acquirer equal to the stock's fair market value.

Accepted Answer

A) True 
 B)False

Question 7

Carlos transfers property with a tax basis of $535 and a fair market value of $1,060 to a corporation in exchange for stock with a fair market value of $785 and $56 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $219 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Accepted Answer

A) $1,060 
B) $729 
C) $591 
D) $372 
A) $1,060 
B) $729 
C) $591 
D) $372

Question 8

Mike and Michelle decided to liquidate their jointly owned corporation, Pennsylvania Corporation. After liquidating 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 $283,000 cash in exchange for his 40 percent interest in Pennsylvania. Mike's tax basis in his Pennsylvania stock is $68,000. Michelle will receive the building and land in exchange for her 60 percent interest in Pennsylvania. Her tax basis in the Pennsylvania stock is $136,000.What amount of gain or loss does Pennsylvania recognize in the complete liquidation?

Accepted Answer

Pennsylvania has a taxable transaction a

Question 9

Maria defers $100 of gain realized in a §351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

Accepted Answer

A) True 
 B)False

Question 10

Tristan transfers property with a tax basis of $1,015 and a fair market value of $1,520 to a corporation in exchange for stock with a fair market value of $1,015 and $378 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $127 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Accepted Answer

A) $1,520 
B) $1,393 
C) $1,142 
D) $1,015 
A) $1,520 
B) $1,393 
C) $1,142 
D) $1,015

Question 11

Which of the following statements best describes the tax consequences of a §338 election?

Accepted Answer

A) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a stepped-up basis in the assets acquired. 
B) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a carryover basis in the assets acquired. 
C) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a stepped-up basis in the assets acquired. 
D) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a carryover basis in the assets acquired. 
A) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a stepped-up basis in the assets acquired. 
B) Gain or loss is recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a carryover basis in the assets acquired. 
C) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a stepped-up basis in the assets acquired. 
D) Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets, and the buyer gets a carryover basis in the assets acquired.

Question 12

A liquidated corporation will always recognize gain in a complete liquidation.

Accepted Answer

A) True 
 B)False

Question 13

Mike and Michelle decided to liquidate their jointly owned corporation, Pennsylvania Corporation. After liquidating 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 14

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 to Fenway Company?

Accepted Answer

Zero.Contributions t

Question 15

Robin transferred her 60 percent interest to Cardinal Company as part of a complete liquidation 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) $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin 
B) $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin 
C) No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin 
D) No loss recognized by Cardinal and a basis in the land of $800,000 to Robin 
A) $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin 
B) $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin 
C) No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin 
D) No loss recognized by Cardinal and a basis in the land of $800,000 to Robin

Question 16

Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company. In the exchange, Packard received land with a fair market value of $497,500. Packard's basis in the State stock was $687,500. The land had a basis to State Company of $635,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?

Accepted Answer

A) $137,500 loss recognized by State and a basis in the land of $497,500 to Packard. 
B) $137,500 loss recognized by State and a basis in the land of $635,000 to Packard. 
C) No loss recognized by State and a basis in the land of $497,500 to Packard. 
D) No loss recognized by State and a basis in the land of $635,000 to Packard. 
A) $137,500 loss recognized by State and a basis in the land of $497,500 to Packard. 
B) $137,500 loss recognized by State and a basis in the land of $635,000 to Packard. 
C) No loss recognized by State and a basis in the land of $497,500 to Packard. 
D) No loss recognized by State and a basis in the land of $635,000 to Packard.

Question 17

Juan transferred 100 percent of his stock in Rosa Company to Azul Corporation in a Type B stock-for-stock exchange. In exchange, he received stock in Azul with a fair market value of $1,000,000. Juan's tax basis in the Rosa stock was $400,000. What amount of gain does Juan recognize in the exchange and what is his basis in the Azul stock he receives?

Accepted Answer

A) $600,000 gain recognized and a basis in Azul stock of $400,000 
B) No gain recognized and a basis in Azul stock of $400,000 
C) $600,000 gain recognized and a basis in Azul stock of $1,000,000 
D) No gain recognized and a basis in Azul stock of $1,000,000 
A) $600,000 gain recognized and a basis in Azul stock of $400,000 
B) No gain recognized and a basis in Azul stock of $400,000 
C) $600,000 gain recognized and a basis in Azul stock of $1,000,000 
D) No gain recognized and a basis in Azul stock of $1,000,000

Question 18

Which of the following statements best describes the concept of control as it applies to a §351 transaction?

Accepted Answer

A) Control is defined as the ownership of 80 percent or more of a corporation's voting stock. 
B) Control is defined as the ownership of 80 percent or more of the fair market value of a corporation's stock. 
C) Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the fair market value of a corporation's stock. 
D) Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the total number of shares of each class of nonvoting stock. 
A) Control is defined as the ownership of 80 percent or more of a corporation's voting stock. 
B) Control is defined as the ownership of 80 percent or more of the fair market value of a corporation's stock. 
C) Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the fair market value of a corporation's stock. 
D) Control is defined as the ownership of 80 percent or more of a corporation's voting stock and 80 percent or more of the total number of shares of each class of nonvoting stock.

Question 19

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

Accepted Answer

A) Continuity of interest requires each shareholder to receive at least 40 percent of the consideration received in equity of the acquirer. 
B) Continuity of interest requires shareholders in the aggregate to receive at least 40 percent of the consideration received in equity of the acquirer. 
C) Continuity of interest requires each shareholder to receive at least 80 percent of the consideration received in equity of the acquirer. 
D) Continuity of interest requires shareholders in the aggregate to receive at least 80 percent of the consideration received in equity of the acquirer. 
A) Continuity of interest requires each shareholder to receive at least 40 percent of the consideration received in equity of the acquirer. 
B) Continuity of interest requires shareholders in the aggregate to receive at least 40 percent of the consideration received in equity of the acquirer. 
C) Continuity of interest requires each shareholder to receive at least 80 percent of the consideration received in equity of the acquirer. 
D) Continuity of interest requires shareholders in the aggregate to receive at least 80 percent of the consideration received in equity of the acquirer.

Question 20

Sami transferred property with a fair market value of $600 and a tax basis of $300 to a corporation in exchange for stock with a fair market value of $600. In addition, Sami received stock with a fair market value of $50 in exchange for services she provided to the corporation in the incorporation process. Which of the following statements best describes the tax result to Sami because of the exchanges?

Accepted Answer

A) Sami will recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
B) Sami will recognize $50 of compensation income, but she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
C) Sami will not recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
D) Sami will not recognize $50 of compensation income, and she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
A) Sami will recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
B) Sami will recognize $50 of compensation income, but she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
C) Sami will not recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under §351. 
D) Sami will not recognize $50 of compensation income, and she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under §351.

Which of the following statements does not describe a requirement that must be met in a tax-deferred reverse triangular merger?

Which of the following statements about §351 transactions is false?

The shareholders in the target corporation always receive a tax basis in the stock received from the acquirer equal to the stock's fair market value.

Maria defers $100 of gain realized in a §351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

Which of the following statements best describes the tax consequences of a §338 election?

A liquidated corporation will always recognize gain in a complete liquidation.

Which of the following statements best describes the concept of control as it applies to a §351 transaction?

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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 statements does not describe a requirement that must be met in a tax-deferred reverse triangular merger?

Which of the following statements about §351 transactions is false?

The shareholders in the target corporation always receive a tax basis in the stock received from the acquirer equal to the stock's fair market value.

Maria defers $100 of gain realized in a §351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

Which of the following statements best describes the tax consequences of a §338 election?

A liquidated corporation will always recognize gain in a complete liquidation.

Which of the following statements best describes the concept of control as it applies to a §351 transaction?

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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