Exam 7: Corporate Acquisitions and Reorganizations

In a Type B reorganization, the target corporation exchange their stock for the acquiring corporation's voting stock, and the target corporation remains in existence as the acquiring corporation's subsidiary.

Identify which of the following statements is true.

Identify which of the following statements is true.

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. What is Barbara's basis for her Acme stock?

Identify which of the following statements is true.

Parent Corporation purchases all of Target Corporation's stock for $200,000 and makes a deemed liquidation election. Target Corporation has Class I assets with an adjusted basis of $55,000 and an FMV of $55,000; Class II assets with an adjusted basis of $40,000 and an FMV of $60,000; and Class V assets with an adjusted basis of $70,000 and an FMV of $100,000. The Class V assets are subject to a $20,000 liability. Assume a 34% corporate tax rate. What is the adjusted grossed-up basis of Target Corporation's stock?

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

On July 1, in connection with a recapitalization of Yorktown Corporation, Robert Moore exchanges 1,000 shares of Yorktown preferred stock, which cost him $95,000, for 1,000 shares of Yorktown common stock worth $108,000 and bonds having a principal amount of $10,000 and an FMV of $10,500. What is the amount of Moore's realized and recognized gain?

Identify which of the following statements is true.

Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock. Stone Corporation distributes the Rock stock to its shareholders pursuant to its liquidation. After the acquisition, Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value). The transaction is classified as a

Florida Corporation is 100% owned by Lawton Chiles. Georgia Corporation is 100% owned by Zell Miller. Georgia Corporation acquires on December 31 of the previous year all of Florida Corporation's stock for $5,000,000 in a cash purchase transaction. Both corporations use the calendar year as their tax year. At the time of the acquisition, Florida Corporation had a $500,000 NOL. During the current year, the two corporations file separate tax returns and Florida Corporation reports $700,000 of taxable income. The long-term tax-exempt rate for the period, including the acquisition date is 6%. What is Florida Corporation's taxable income for the current year?

American Corporation acquires the noncash assets of Utech Corporation in exchange for $700,000 of its voting stock plus $50,000 of cash. Utech Corporation assets are worth $750,000. Utech Corporation does not distribute the stock and cash but instead holds the stock as an investment. Utech will use the American cash along with the cash it retained to start a new business. The transaction can be classified as a

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?

Acquiring Corporation acquires at the close of business on June 30 (of a nonleap year)all of the stock of Target Corporation as part of a merger transaction. Target Corporation is liquidated into Acquiring Corporation on the same day as part of the merger. Acquiring obtains assets having a $600,000 FMV and a $275,000 adjusted basis, along with a $100,000 net operating loss. Acquiring Corporation reports taxable income of $146,000 for the year. What amount of Target Corporation's NOL can be used to offset Acquiring Corporation's taxable income? (Assume all months have 30 days and ignore the Sec. 382 limitation rules.)

Paper Corporation adopts a plan of reorganization and exchanges 1,000 shares of its voting stock and $50,000 in cash for Chase Corporation's assets having a $200,000 adjusted basis and a $275,000 FMV. Chase Corporation is subsequently liquidated. What is Paper Corporation's basis in the assets acquired in the exchange?

In a Type B reorganization, the 1. stock of the target corporation is acquired solely for the voting stock of either the acquiring corporation or its parent. 2) acquiring corporation must have control of the target corporation immediately after the acquisition.

Acquiring Corporation acquires all of the assets of Target Corporation in exchange for $3,000,000 of Acquiring common stock and the assumption of $2,000,000 of Target's liabilities. The assets had a $2,300,000 adjusted basis to Target. Target's sole shareholder, Paula, had a $1,000,000 adjusted basis for her stock. Target Corporation had $600,000 of E&P on the acquisition date. Paula receives all of the Acquiring common stock in the liquidation of Target. What are the tax consequences of the acquisition to: Acquiring, Target, and Paula?

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?

Briefly describe A, B, C, D, and G reorganization types.