Question 1

A liquidation must be reported to the Internal Revenue Service on Form 966

Accepted Answer

A) within 60 days of the adoption of a plan of liquidation. 
B) that is filed with the national IRS office. 
C) whether the shareholders' realized gain is recognized or not. 
D) by the shareholders. 
A) within 60 days of the adoption of a plan of liquidation. 
B) that is filed with the national IRS office. 
C) whether the shareholders' realized gain is recognized or not. 
D) by the shareholders.

Question 2

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

Accepted Answer

A corporation that is 100% owned by anot

Question 3

A corporation is required to file Form 966 within 30 days after the adoption of a plan of liquidation.

Accepted Answer

A) True 
 B)False

Question 4

The adjusted basis of property received in a complete liquidation is its fair market value on the distribution date.

Accepted Answer

A) True 
 B)False

Question 5

Liquidation rules generally are applied the same to the following organizations except for

Accepted Answer

A) subsidiary corporations (80% controlled). 
B) C corporations. 
C) S corporations. 
D) subsidiary corporations (less than 80% controlled). 
A) subsidiary corporations (80% controlled). 
B) C corporations. 
C) S corporations. 
D) subsidiary corporations (less than 80% controlled).

Question 6

Carly owns 25% of Base Corporation's single class of stock and Premier Corporation owns the remaining 75%. Carly's basis in the Base stock is $200,000 and Premier Corporation's basis in the Base stock is $600,000. Carly receives property with a $175,000 adjusted basis and a $250,000 FMV and Premier Corporation receives property with a $600,000 adjusted basis and a $750,000 FMV in complete liquidation of Base Corporation. All of Base's cash is used to pay its liabilities. Which of following statements is correct concerning the tax effects of the liquidation?

Accepted Answer

A) Neither Carly nor Premier Corporation will recognize a gain. 
B) Carly will recognize some gain but Premier Corporation will not recognize any gain. 
C) Both Carly and Premier will recognize some gain. 
D) Carly will not recognize any gain but Premier will recognize some gain. 
A) Neither Carly nor Premier Corporation will recognize a gain. 
B) Carly will recognize some gain but Premier Corporation will not recognize any gain. 
C) Both Carly and Premier will recognize some gain. 
D) Carly will not recognize any gain but Premier will recognize some gain.

Question 7

In a complete liquidation of a corporation, which of the following is false?

Accepted Answer

A) All stock of the liquidating corporation is canceled or redeemed. 
B) The corporation ceases to be a going concern. 
C) The corporation divests itself of substantially all its properties. 
D) The liquidation of a corporation means it has undergone dissolution. 
A) All stock of the liquidating corporation is canceled or redeemed. 
B) The corporation ceases to be a going concern. 
C) The corporation divests itself of substantially all its properties. 
D) The liquidation of a corporation means it has undergone dissolution.

Question 8

Identify which of the following statements is true.

Accepted Answer

A) Upon liquidation, any capitalized expenditures unamortized at the time of liquidation should be deducted if they have no further value to the corporation. 
B) Shareholders who receive an installment obligation as part of their liquidating distribution ordinarily report the FMV of their obligation as part of the consideration received to calculate the amount of recognized gain or loss. 
C) A liquidating corporation treats expenses associated with selling its property as an offset against the sales proceeds. 
D) All of the above are true. 
A) Upon liquidation, any capitalized expenditures unamortized at the time of liquidation should be deducted if they have no further value to the corporation. 
B) Shareholders who receive an installment obligation as part of their liquidating distribution ordinarily report the FMV of their obligation as part of the consideration received to calculate the amount of recognized gain or loss. 
C) A liquidating corporation treats expenses associated with selling its property as an offset against the sales proceeds. 
D) All of the above are true.

Question 9

Under a plan of complete liquidation, Key Corporation distributes land (not a disqualified property)with an adjusted basis of $410,000 and an FMV of $300,000 for all Sharon's stock. Sharon's basis in her 5% interest in the Key stock is $250,000. Find Sharon's basis in the land and Key Corporation's recognized gain or loss.

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 10

Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock. Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000. Under a plan of complete liquidation, Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000. Ball and Jack's bases in the property received are:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 11

Identify which of the following statements is true.

Accepted Answer

A) With limited exceptions, a loss can be recognized by a liquidating corporation when it makes a liquidating distribution of property that has declined in value. 
B) When computing the corporate-level gain on a liquidating distribution, the FMV of the property cannot exceed the liability assumed or acquired by the shareholder. 
C) The FMV of property distributed by a liquidating corporation can be less than the amount of the liability assumed or acquired by the shareholder. 
D) All of the above are false. 
A) With limited exceptions, a loss can be recognized by a liquidating corporation when it makes a liquidating distribution of property that has declined in value. 
B) When computing the corporate-level gain on a liquidating distribution, the FMV of the property cannot exceed the liability assumed or acquired by the shareholder. 
C) The FMV of property distributed by a liquidating corporation can be less than the amount of the liability assumed or acquired by the shareholder. 
D) All of the above are false.

Question 12

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

Accepted Answer

A) True 
 B)False

Question 13

Under the general liquidation rules, Kansas Corporation is liquidated, with Sam Topeka receiving $20,000 in cash plus other property having a $24,000 FMV. Sam Topeka's basis in his Kansas stock is $32,000. What is Sam Topeka's amount realized and gain recognized on the liquidation?

Accepted Answer

Sam Topeka's amount realized i

Question 14

Identify which of the following statements is false.

Accepted Answer

A) An individual taxpayer, who is assessed an additional payment of money based on stock ownership in a corporation whose stock is redeemed in a complete liquidation, may recognize a capital loss to the extent of the additional assessment. 
B) The open transaction doctrine defers the shareholder's gain or loss from a liquidation until the assets can be valued by sale or collection. 
C) The open transaction doctrine as applied to complete corporate liquidations refers to the numerous planning alternatives available when liquidating a corporation. 
D) The IRS asserts that the open transaction doctrine should be used only in extraordinary circumstances. 
A) An individual taxpayer, who is assessed an additional payment of money based on stock ownership in a corporation whose stock is redeemed in a complete liquidation, may recognize a capital loss to the extent of the additional assessment. 
B) The open transaction doctrine defers the shareholder's gain or loss from a liquidation until the assets can be valued by sale or collection. 
C) The open transaction doctrine as applied to complete corporate liquidations refers to the numerous planning alternatives available when liquidating a corporation. 
D) The IRS asserts that the open transaction doctrine should be used only in extraordinary circumstances.

Question 15

Last year, Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock. This year, Keke Corporation adopted a plan of liquidation. Prior to the adoption of the liquidation plan, Keke had not used the pretzel maker in connection with the conduct of its trade or business. Which of the following statements is true?

Accepted Answer

A) Keke Corporation may recognize a loss of $1,800. 
B) Keke Corporation may recognize a loss of $200. 
C) Keke Corporation's basis for determining the loss will be $2,000. 
D) Keke Corporation's basis for determining the loss will be $200. 
A) Keke Corporation may recognize a loss of $1,800. 
B) Keke Corporation may recognize a loss of $200. 
C) Keke Corporation's basis for determining the loss will be $2,000. 
D) Keke Corporation's basis for determining the loss will be $200.

Question 16

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

Accepted Answer

A complete liquidation is defined by Reg

Question 17

In a Sec. 332 liquidation, can a subsidiary corporation recognize losses on distributions to either the parent corporation or minority shareholders?

Accepted Answer

No. Section 332 liquidations are an exce

Question 18

Dexer Corporation is owned 70% by Amy and 30% by Brad. Dexer Corporation owns Eagle Corporation stock with a $50,000 adjusted basis and a $30,000 FMV. The stock is not disqualified property. As part of a complete liquidation, the Eagle Corporation stock is distributed to Amy. Amy's basis in her Dexer stock is $40,000. Dexer Corporation will recognize

Accepted Answer

A) no loss. 
B) a $10,000 loss. 
C) a $20,000 loss. 
D) none of the above 
A) no loss. 
B) a $10,000 loss. 
C) a $20,000 loss. 
D) none of the above

Question 19

Identify which of the following statements is false.

Accepted Answer

A) Liquidating distributions made to minority shareholders in the tax-free liquidation of a controlled subsidiary corporation are treated by the liquidating corporation in the same way as nonliquidating distributions. 
B) Sec. 337(a)provides that the liquidating corporation recognizes no gain or loss on the distribution of property to the 80% distributee in a complete Sec. 332 liquidation. 
C) The depreciation recapture provisions in Secs. 1245 and 1250 override the Sec. 337(a)nonrecognition rule if a controlled subsidiary corporation is liquidated into its parent corporation. 
D) A corporation that distributes the stock of a subsidiary may elect to treat the distribution as a sale of the subsidiary's assets. 
A) Liquidating distributions made to minority shareholders in the tax-free liquidation of a controlled subsidiary corporation are treated by the liquidating corporation in the same way as nonliquidating distributions. 
B) Sec. 337(a)provides that the liquidating corporation recognizes no gain or loss on the distribution of property to the 80% distributee in a complete Sec. 332 liquidation. 
C) The depreciation recapture provisions in Secs. 1245 and 1250 override the Sec. 337(a)nonrecognition rule if a controlled subsidiary corporation is liquidated into its parent corporation. 
D) A corporation that distributes the stock of a subsidiary may elect to treat the distribution as a sale of the subsidiary's assets.

Question 20

Identify which of the following statements is true.

Accepted Answer

A) The Sec. 332 nonrecognition rules apply to the parent corporation when a subsidiary corporation transfers property to the parent corporation in payment of the subsidiary's debt obligation. 
B) A subsidiary corporation is prevented from recognizing gain or loss when transferring property to its parent corporation in satisfaction of an indebtedness it owes to the parent corporation as part of its complete liquidation. 
C) Nonrecognition of gain or loss rules apply to a subsidiary corporation when, pursuant to its complete liquidation, the subsidiary transfers property to a third-party creditor. 
D) All of the above are false. 
A) The Sec. 332 nonrecognition rules apply to the parent corporation when a subsidiary corporation transfers property to the parent corporation in payment of the subsidiary's debt obligation. 
B) A subsidiary corporation is prevented from recognizing gain or loss when transferring property to its parent corporation in satisfaction of an indebtedness it owes to the parent corporation as part of its complete liquidation. 
C) Nonrecognition of gain or loss rules apply to a subsidiary corporation when, pursuant to its complete liquidation, the subsidiary transfers property to a third-party creditor. 
D) All of the above are false.

A liquidation must be reported to the Internal Revenue Service on Form 966

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

A corporation is required to file Form 966 within 30 days after the adoption of a plan of liquidation.

The adjusted basis of property received in a complete liquidation is its fair market value on the distribution date.

Liquidation rules generally are applied the same to the following organizations except for

In a complete liquidation of a corporation, which of the following is false?

Identify which of the following statements is true.

Identify which of the following statements is true.

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

Under the general liquidation rules, Kansas Corporation is liquidated, with Sam Topeka receiving $20,000 in cash plus other property having a $24,000 FMV. Sam Topeka's basis in his Kansas stock is $32,000. What is Sam Topeka's amount realized and gain recognized on the liquidation?

Identify which of the following statements is false.

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

In a Sec. 332 liquidation, can a subsidiary corporation recognize losses on distributions to either the parent corporation or minority shareholders?

Identify which of the following statements is false.

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 Acquisitions and Reorganizations

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

Exam 6: Corporate Liquidating Distributions

A liquidation must be reported to the Internal Revenue Service on Form 966

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

A corporation is required to file Form 966 within 30 days after the adoption of a plan of liquidation.

The adjusted basis of property received in a complete liquidation is its fair market value on the distribution date.

Liquidation rules generally are applied the same to the following organizations except for

In a complete liquidation of a corporation, which of the following is false?

Identify which of the following statements is true.

Identify which of the following statements is true.

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

Under the general liquidation rules, Kansas Corporation is liquidated, with Sam Topeka receiving $20,000 in cash plus other property having a $24,000 FMV. Sam Topeka's basis in his Kansas stock is $32,000. What is Sam Topeka's amount realized and gain recognized on the liquidation?

Identify which of the following statements is false.

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

In a Sec. 332 liquidation, can a subsidiary corporation recognize losses on distributions to either the parent corporation or minority shareholders?

Identify which of the following statements is false.

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 Acquisitions and Reorganizations

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