Exam 19: Corporate Formation, Reorganization, and Liquidation

Casey transfers property with a tax basis of $2,000 and a fair market value of $5,000 to a corporation in exchange for stock with a fair market value of $4,000 and $400 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $600 on the property transferred. Casey also incurred selling expenses of $300. What is the amount realized by Casey in the exchange?

Which of the following principles does not need to be satisfied for an acquisition to be a tax-deferred reorganization?

Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, Red Blossom received land with a fair market value of $500,000. The corporation's basis in the Tea Company stock was $300,000. The land had a basis to Tea Company of $600,000. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives?

A Type A reorganization deals with the transfer of assets by the target corporation in a merger.

Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

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

What amount of gain or loss does Keegan realize on the transfer of the property to his corporation?

What amount of gain or loss does Michelle recognize in the complete liquidation and what is her tax basis in the building and land after the complete liquidation?

Camille transfers property with a tax basis of $800 and a fair market value of $1,200 to a corporation in exchange for stock with a fair market value of $850 and $350 in a transaction that qualifies for deferral under section 351. Camille also incurred selling expenses of $100. What is the amount realized by Camille in the exchange?

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?

Which of the following statements best describes the tax consequences that arise from a contribution of capital to a corporation by an existing shareholder?

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?

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

Which of the following statements best describes a section 338 transaction?

Which of the following amounts is not included in the computation of a property's adjusted basis in an exchange?

Which of the following amounts is not included in the computation of amount realized in an exchange?

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

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

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. FMV Adjusted basis Inventory \ 30,000 \ 10,000 Building 130,000 80,000 Land Total \ 210,000 \ The corporation also assumed a mortgage of $60,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $150,000. What amount of gain or loss does Francine recognize on the transfer of the property to her corporation?