Question 1

Identify which of the following statements is true.

Accepted Answer

A) 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. 
B) In tax-free reorganizations, one transaction cannot qualify for more than one type of tax-free reorganization. 
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) 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. 
B) In tax-free reorganizations, one transaction cannot qualify for more than one type of tax-free reorganization. 
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 2

The acquiring corporation does not obtain the target corporation's tax attributes in

Accepted Answer

A) a Type A reorganization. 
B) a Type B reorganization. 
C) an acquisitive Type C reorganization. 
D) an acquisitive Type D reorganization. 
A) a Type A reorganization. 
B) a Type B reorganization. 
C) an acquisitive Type C reorganization. 
D) an acquisitive Type D reorganization.

Question 3

Identify which of the following statements is false.

Accepted Answer

A) The acquiring corporation does not recognize gains or losses under Sec. 1001 when it transfers noncash boot property to the target corporation or its shareholders. 
B) Gain recognized by a shareholder in a tax-free reorganization may be characterized as a dividend. 
C) If no gain or loss is recognized by a stock or security holder in a tax-free reorganization, the stock or securities received take a substituted basis equal to the basis of the shares or securities surrendered. 
D) Tax-free reorganizations generally do not involve actual redemptions of the stock of the target corporation's shareholders. 
A) The acquiring corporation does not recognize gains or losses under Sec. 1001 when it transfers noncash boot property to the target corporation or its shareholders. 
B) Gain recognized by a shareholder in a tax-free reorganization may be characterized as a dividend. 
C) If no gain or loss is recognized by a stock or security holder in a tax-free reorganization, the stock or securities received take a substituted basis equal to the basis of the shares or securities surrendered. 
D) Tax-free reorganizations generally do not involve actual redemptions of the stock of the target corporation's shareholders.

Question 4

Identify which of the following statements is false.

Accepted Answer

A) A taxable acquisition of the assets of a target corporation that is subsequently liquidated, results in a loss of the target corporation's tax attributes. 
B) A taxable acquisition of the assets of a target corporation, that is subsequently liquidated, results in the target corporation's shareholders recognizing gain or loss on the surrender of their target stock. 
C) An acquiring corporation in a tax-free or a taxable acquisition transaction does not recognize gain or loss when its stock is issued in exchange for property. 
D) An acquiring corporation in a taxable acquisition transaction must acquire all of the assets and liabilities of the target corporation. 
A) A taxable acquisition of the assets of a target corporation that is subsequently liquidated, results in a loss of the target corporation's tax attributes. 
B) A taxable acquisition of the assets of a target corporation, that is subsequently liquidated, results in the target corporation's shareholders recognizing gain or loss on the surrender of their target stock. 
C) An acquiring corporation in a tax-free or a taxable acquisition transaction does not recognize gain or loss when its stock is issued in exchange for property. 
D) An acquiring corporation in a taxable acquisition transaction must acquire all of the assets and liabilities of the target corporation.

Question 5

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-free

Question 6

Which of the following definitions of Sec. 338 property classes is not correct?

Accepted Answer

A) Class I: cash, demand deposits, and similar accounts in banks, savings and loan associations, etc. 
B) Class II: actively traded personal property such as publicly traded securities 
C) Class III: covenants not to compete, similar restrictions on trade, etc. 
D) Class IV: inventory or other property held primarily for sale to customers 
A) Class I: cash, demand deposits, and similar accounts in banks, savings and loan associations, etc. 
B) Class II: actively traded personal property such as publicly traded securities 
C) Class III: covenants not to compete, similar restrictions on trade, etc. 
D) Class IV: inventory or other property held primarily for sale to customers

Question 7

Identify which of the following statements is false.

Accepted Answer

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

Question 8

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?

Accepted Answer

The answer of Carol owns Target Corporation stock having an...

Question 9

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year. Melon Corporation uses a calendar tax year. To use the Sec. 338 election, Melon Corporation must purchase

Accepted Answer

A) an additional 50% of Hill Corporation stock by December 31 of this year. 
B) an additional 50% of Hill Corporation stock by July 30 of next year. 
C) an additional 51% of Hill Corporation stock by December 31 of this year. 
D) an additional 51% of Hill Corporation stock by July 30 of next year. 
A) an additional 50% of Hill Corporation stock by December 31 of this year. 
B) an additional 50% of Hill Corporation stock by July 30 of next year. 
C) an additional 51% of Hill Corporation stock by December 31 of this year. 
D) an additional 51% of Hill Corporation stock by July 30 of next year.

Question 10

Identify which of the following statements is true.

Accepted Answer

A) The acquired corporation in a Type C reorganization may retain its corporation charter. 
B) Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and $25,000 in cash. Beta is subsequently liquidated. This exchange qualifies as a Type C reorganization. 
C) Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and the assumption of $25,000 of Beta liabilities. Beta is subsequently liquidated. This exchange does not qualify as a Type C reorganization. 
D) All of the above are false. 
A) The acquired corporation in a Type C reorganization may retain its corporation charter. 
B) Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and $25,000 in cash. Beta is subsequently liquidated. This exchange qualifies as a Type C reorganization. 
C) Alpha Corporation acquires 100% of the assets of Beta Corporation in exchange for $75,000 of Alpha stock and the assumption of $25,000 of Beta liabilities. Beta is subsequently liquidated. This exchange does not qualify as a Type C reorganization. 
D) All of the above are false.

Question 11

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

Accepted Answer

First, the target corporation's sharehol

Question 12

Table Corporation transfers one-half of its assets to Chair Corporation in exchange for 100% of Chair Corporation's single class of stock. Following the exchange, Table Corporation distributes the Chair stock ratably to its shareholders. This transaction will constitute a

Accepted Answer

A) Type A reorganization. 
B) Type C reorganization. 
C) divisive Type D reorganization. 
D) acquisitive Type D reorganization. 
A) Type A reorganization. 
B) Type C reorganization. 
C) divisive Type D reorganization. 
D) acquisitive Type D reorganization.

Question 13

Gulf Corporation wants to acquire all of Beamer Corporation's assets and liabilities in a Type C reorganization. The FMV of Beamer's assets is $500,000. Beamer's liabilities are $70,000. How much cash can Gulf Corporation use to pay for Beamer's assets without violating the Type C reorganization requirements?

Accepted Answer

0.20 × $500,000 = $100,000 noncash consi

Question 14

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

Question 15

John Van Kirk owns all the stock of Monmouth Restaurant Corporation in Pittsburgh. John would like to sell his business and retire to sunny Florida now that he has turned 65. Pam, a long-time bartender at Monmouth Restaurant, offers to purchase all the business's noncash assets in exchange for a 25% down payment, with the remaining 75% being paid in five equal annual installments. Interest will be charged at a 10% rate on the unpaid installments. John plans to liquidate the corporation that has operated the restaurant and have Monmouth Restaurant distribute the installment notes and any remaining assets. What tax issues should Monmouth Restaurant, John, and Pam consider with respect to the purchase transaction?

Accepted Answer

The following tax issues should be consi

Question 16

Identify which of the following statements is true.

Accepted Answer

A) A deemed liquidation election is available when a target corporation is liquidated into its parent corporation. 
B) Corporate purchasers generally prefer Sec. 338 treatment because of the significant tax savings originating from the step-up in basis. 
C) The Sec. 338 deemed liquidation rules require that 100% of the target corporation's stock be purchased. 
D) All of the above are false. 
A) A deemed liquidation election is available when a target corporation is liquidated into its parent corporation. 
B) Corporate purchasers generally prefer Sec. 338 treatment because of the significant tax savings originating from the step-up in basis. 
C) The Sec. 338 deemed liquidation rules require that 100% of the target corporation's stock be purchased. 
D) All of the above are false.

Question 17

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization. Brad also receives $6,000 cash as part of the reorganization. How much gain must Brad recognize?

Accepted Answer

Gain is recognized in a Type A

Question 18

In a taxable asset acquisition, the purchaser does not acquire unknown and contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 19

Identify which of the following statements is true.

Accepted Answer

A) 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. 
B) In a tax-free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation. 
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, the acquiring corporation's holding period for the acquired properties includes the period of time the target corporation held the properties. 
B) In a tax-free reorganization, if the acquiring corporation uses nonmonetary boot property, gains or losses will be recognized by the acquiring corporation. 
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 20

Zebra Corporation transfers assets with a $120,000 basis and a $250,000 FMV to Hat Corporation for common stock worth $200,000 and cash of $50,000. The exchange qualifies as a tax-free reorganization. Zebra Corporation distributes the stock and cash to its shareholders pursuant to its liquidation. How much gain must Zebra Corporation recognize?

Accepted Answer

No gain is recognized if the b

Identify which of the following statements is true.

The acquiring corporation does not obtain the target corporation's tax attributes in

Identify which of the following statements is false.

Identify which of the following statements is false.

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?

Which of the following definitions of Sec. 338 property classes is not correct?

Identify which of the following statements is false.

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year. Melon Corporation uses a calendar tax year. To use the Sec. 338 election, Melon Corporation must purchase

Identify which of the following statements is true.

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

Table Corporation transfers one-half of its assets to Chair Corporation in exchange for 100% of Chair Corporation's single class of stock. Following the exchange, Table Corporation distributes the Chair stock ratably to its shareholders. This transaction will constitute a

Identify which of the following statements is true.

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization. Brad also receives $6,000 cash as part of the reorganization. How much gain must Brad recognize?

In a taxable asset acquisition, the purchaser does not acquire unknown and contingent liabilities.

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

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Partnership Formation and Operation

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The Gift Tax

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Exam 7: Corporate Acquisitions and Reorganizations

Identify which of the following statements is true.

The acquiring corporation does not obtain the target corporation's tax attributes in

Identify which of the following statements is false.

Identify which of the following statements is false.

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?

Which of the following definitions of Sec. 338 property classes is not correct?

Identify which of the following statements is false.

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year. Melon Corporation uses a calendar tax year. To use the Sec. 338 election, Melon Corporation must purchase

Identify which of the following statements is true.

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

Table Corporation transfers one-half of its assets to Chair Corporation in exchange for 100% of Chair Corporation's single class of stock. Following the exchange, Table Corporation distributes the Chair stock ratably to its shareholders. This transaction will constitute a

Identify which of the following statements is true.

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization. Brad also receives $6,000 cash as part of the reorganization. How much gain must Brad recognize?

In a taxable asset acquisition, the purchaser does not acquire unknown and contingent liabilities.

Identify which of the following statements is true.

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

Us Taxation of Foreign-Related Transactions

Filters