Question 1

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

Accepted Answer

A) True 
 B)False

Question 2

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)  In the aggregate, the transferors of property to the corporation must collectively control 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)  Each transferor of property must receive stock equal to at least 80 percent of the fair market value of the property transferred. 
B)  In the aggregate, the transferors of property to the corporation must collectively control 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 3

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,$40,00

Question 4

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 $300,000.Packard's basis in the State stock was $600,000.The land had a basis to State Company of $500,000.What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?

Accepted Answer

A)  $200,000 loss recognized by State and a basis in the land of $300,000 to Packard. 
B)  $200,000 loss recognized by State and a basis in the land of $500,000 to Packard. 
C)  No loss recognized by State and a basis in the land of $300,000 to Packard. 
D)  No loss recognized by State and a basis in the land of $500,000 to Packard. 
A)  $200,000 loss recognized by State and a basis in the land of $300,000 to Packard. 
B)  $200,000 loss recognized by State and a basis in the land of $500,000 to Packard. 
C)  No loss recognized by State and a basis in the land of $300,000 to Packard. 
D)  No loss recognized by State and a basis in the land of $500,000 to Packard.

Question 5

Sybil transfers property with a tax basis of $5,000 and a fair market value of $6,000 to a corporation in exchange for stock with a fair market value of $3,000 and $2,000 in cash in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $1,000 on the property transferred.What is Sybil's tax basis in the stock received in the exchange?

Accepted Answer

A)  $6,000. 
B)  $5,000. 
C)  $4,000. 
D)  $3,000. 
A)  $6,000. 
B)  $5,000. 
C)  $4,000. 
D)  $3,000.

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

Rich and Rita propose to have their corporation,Big Blue,acquire another corporation,Green Company,in a stock-for-stock Type B acquisition.The sole shareholder of Green,Mark Dee,will receive $500,000 of Big Blue voting stock in the transaction.Mark's tax basis in his Green stock is $100,000.What is Mark's tax basis in the Big Blue stock he receives in the exchange and what is Big Blue's basis in the Green stock it receives in return?

Accepted Answer

Mark's basis in the Big Blue stock is $1

Question 8

Which of the following statements best describes the tax benefits that arise from the sale of section 1244 stock?

Accepted Answer

A)  Section 1244 allows an individual shareholder to exempt gain from sale of the stock from tax. 
B)  Section 1244 allows an individual shareholder to deduct all of the loss from sale of the stock as an ordinary loss in the year of the sale. 
C)  Section 1244 allows an individual shareholder to deduct up to $50,000 of the loss from sale of the stock as an ordinary loss in the year of the sale. 
D)  Section 1244 allows a corporate shareholder to deduct up to $50,000 of the loss from sale of the stock as an ordinary loss in the year of the sale. 
A)  Section 1244 allows an individual shareholder to exempt gain from sale of the stock from tax. 
B)  Section 1244 allows an individual shareholder to deduct all of the loss from sale of the stock as an ordinary loss in the year of the sale. 
C)  Section 1244 allows an individual shareholder to deduct up to $50,000 of the loss from sale of the stock as an ordinary loss in the year of the sale. 
D)  Section 1244 allows a corporate shareholder to deduct up to $50,000 of the loss from sale of the stock as an ordinary loss in the year of the sale.

Question 9

Sue transferred 100 percent of her stock in Oakland Company to Applegate Corporation in a Type A merger.In exchange she received stock in Applegate with a fair market value of $800,000 plus $400,000 in cash.Sue's tax basis in the Oakland stock was $1,500,000.What amount of gain or loss does Sue recognize in the exchange and what is her basis in the Applegate stock she receives?

Accepted Answer

No loss recognized.Her basis in the Appl

Question 10

Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 in cash in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $100 on the property transferred.What is Rachelle's tax basis in the stock received in the exchange?

Accepted Answer

A)  $900. 
B)  $850. 
C)  $750. 
D)  $700. 
A)  $900. 
B)  $850. 
C)  $750. 
D)  $700.

Question 11

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

Question 12

Gary and Laura decided to liquidate their jointly owned corporation,Amelia,Inc.After liquidating its remaining inventory and paying off its remaining liabilities,Amelia had the following tax accounting balance sheet.
   Under the terms of the agreement,Gary will receive the $100,000 cash in exchange for his interest in Amelia.Gary's tax basis in his Amelia stock is $30,000.Laura will receive the building and land in exchange for her interest in Amelia.Laura's tax basis in her Amelia stock is $60,000.
What amount of gain or loss does Amelia recognize in the complete liquidation?

Accepted Answer

Amelia has a taxable transaction and rec

Question 13

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 14

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 15

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

Question 16

Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $50 on the property transferred.What is the corporation's tax basis in the property received in the exchange?

Accepted Answer

A)  $150. 
B)  $200. 
C)  $250. 
D)  $300. 
A)  $150. 
B)  $200. 
C)  $250. 
D)  $300.

Question 17

Han transferred land to his corporation in a section 351 transaction.Han had held the land for two years prior to the transfer.The corporation will tack Han's holding period for the land.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

Zhao 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 $50,000 attached to the building and land.The fair market value of the corporation's stock received in the exchange was $330,000.The transaction met the requirements to be tax-deferred under §351.
a.What amount of gain or loss does Zhao realize on the transfer of the property to her corporation?
b.What amount of gain or loss does Zhao recognize on the transfer of the property to her corporation?
c.What is the corporation's adjusted basis in each of the assets received in the exchange?

Accepted Answer

a.$70,000 gain
b.Zhao does not recognize

Question 20

Which of the following class of stock is not allowed to be used in a section 351 transaction?

Accepted Answer

A)  Voting common stock. 
B)  Voting preferred stock. 
C)  Nonvoting preferred stock. 
D)  All of these classes of stock can be used in a section 351 transaction. 
A)  Voting common stock. 
B)  Voting preferred stock. 
C)  Nonvoting preferred stock. 
D)  All of these classes of stock can be used in a section 351 transaction.

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

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

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.

Which of the following statements best describes the tax benefits that arise from the sale of section 1244 stock?

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

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

Han transferred land to his corporation in a section 351 transaction.Han had held the land for two years prior to the transfer.The corporation will tack Han's holding period for the land.

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

Which of the following class of stock is not allowed to be used in a section 351 transaction?

Business Income,Deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

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 Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 8: Corporate Formation, Neorganization, and Liquidation

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

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

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.

Which of the following statements best describes the tax benefits that arise from the sale of section 1244 stock?

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

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

Han transferred land to his corporation in a section 351 transaction.Han had held the land for two years prior to the transfer.The corporation will tack Han's holding period for the land.

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

Which of the following class of stock is not allowed to be used in a section 351 transaction?

Business Income,Deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

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 Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters