Exam 19: Corporate Formation, Reorganization, and Liquidation

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 a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Which of the following statements best describes the tax law approach to recognizing gain or loss realized in an exchange?

Gain or loss is always recognized when realized for tax purposes.

What amount of gain or loss does Mike recognize in the complete liquidation?

Which of the following statements does not describe a requirement that must be met in a tax-deferred reverse triangular merger?

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. The assumed liability will be treated as boot received by Jane.

Robin transferred her 60 percent interest to Cardinal Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $800,000. Robin's basis in the Cardinal stock was $900,000. The land had a basis to Cardinal Company of $1,000,000. What amount of loss does Cardinal recognize in the exchange and what is Robin's basis in the land she receives? The distribution was non pro rata to Robin, a related person.

Celeste transferred 100 percent of her stock in Supply Chain Company to Marketing Corporation in a Type A merger. In exchange, she received stock in Marketing with a fair market value of $500,000 plus $500,000 in cash. Celeste's tax basis in the Supply Chain stock was $1,200,000. What amount of loss does Celeste recognize in the exchange and what is her basis in the Marketing stock she receives?

Which of the following statements best describes the application of the continuity of enterprise principle to a Type A tax-deferred reorganization?

Paladin Corporation transferred its 90 percent interest to Furman Company as part of a complete liquidation of the company. In the exchange, Paladin received land with a fair market value of $1,000,000. The corporation's basis in the Furman Company stock was $400,000. The land had a basis to Furman Company of $200,000. What amount of gain does Paladin recognize in the exchange and what is its basis in the land it receives?

Roy transfers property with a tax basis of $800 and a fair market value of $500 to a corporation in exchange for stock with a fair market value of $400 and $50 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Roy's tax basis in the stock received in the exchange?

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?

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 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?

In December 2011, Jill incurred a $50,000 loss on the sale of Crown Corporation stock that she purchased in 2005. The stock satisfied all of the §1244 stock requirements at the time of issue. Jill is married to Jack and together they file a joint tax return. How much of the loss can Jack and Jill deduct in 2011, assuming they do not have capital gains in the current or prior years, and what is the character of the loss?

Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?

Jasmine transferred 100 percent of her stock in Emerald Company to Jade Corporation in a Type A merger. In exchange she received stock in Jade with a fair market value of $800,000 plus $1,200,000 in cash. Jasmine's tax basis in the Emerald stock was $900,000. What amount of gain does Jasmine recognize in the exchange and what is her basis in the Jade stock she receives?

Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

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

A liquidation of a corporation always is a taxable event to the shareholders of the liquidated corporation.

A shareholder will own the same percentage of stock in the distributing corporation under both a spin-off and a split-off of a subsidiary.