Question 1

A liquidated corporation always recognizes gain realized in a complete liquidation.

Accepted Answer

A) True 
 B)False

Question 2

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in a transaction.

Accepted Answer

A) True 
 B)False

Question 3

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?

Accepted Answer

A)  $200,000 gain recognized and a basis in the land of $600,000 
B)  $200,000 gain recognized and a basis in the land of $500,000 
C)  No gain recognized and a basis in the land of $600,000 
D)  No gain recognized and a basis in the land of $300,000 
A)  $200,000 gain recognized and a basis in the land of $600,000 
B)  $200,000 gain recognized and a basis in the land of $500,000 
C)  No gain recognized and a basis in the land of $600,000 
D)  No gain recognized and a basis in the land of $300,000

Question 4

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?

Accepted Answer

A)  $1,200 
B)  $1,100 
C)  $850 
D)  $750 
A)  $1,200 
B)  $1,100 
C)  $850 
D)  $750

Question 5

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

Accepted Answer

A)  $800,000 gain recognized and a basis in Plum stock of $1,000,000 
B)  $800,000 gain recognized and a basis in Plum stock of $500,000 
C)  $500,000 gain recognized and a basis in Plum stock of $500,000 
D)  $500,000 gain recognized and a basis in Plum stock of $200,000 
A)  $800,000 gain recognized and a basis in Plum stock of $1,000,000 
B)  $800,000 gain recognized and a basis in Plum stock of $500,000 
C)  $500,000 gain recognized and a basis in Plum stock of $500,000 
D)  $500,000 gain recognized and a basis in Plum stock of $200,000

Question 6

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

Accepted Answer

Amelia has a taxable transacti

Question 7

Which of the following statements best describes the tax results to a shareholder in a section 351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

Accepted Answer

A)  Liabilities assumed by a corporation on a section 351 transfer are always treated as boot. 
B)  Liabilities assumed by a corporation on a section 351 transfer are never treated as boot. 
C)  Liabilities assumed by a corporation on a section 351 transfer are treated as boot if the total liabilities assumed exceed the total basis of the assets transferred. 
D)  Liabilities assumed by a corporation on a section 351 transfer are treated as boot if there is no business purpose for the assumption of the liabilities by the corporation. 
A)  Liabilities assumed by a corporation on a section 351 transfer are always treated as boot. 
B)  Liabilities assumed by a corporation on a section 351 transfer are never treated as boot. 
C)  Liabilities assumed by a corporation on a section 351 transfer are treated as boot if the total liabilities assumed exceed the total basis of the assets transferred. 
D)  Liabilities assumed by a corporation on a section 351 transfer are treated as boot if there is no business purpose for the assumption of the liabilities by the corporation.

Question 8

Julian transferred 100 percent of his stock in Lemon Company to Apricot Corporation in a Type B stock-for-stock exchange. In exchange, he received stock in Apricot with a fair market value of $200,000. Julian's tax basis in the Lemon stock was $400,000. What amount of loss does Julian recognize in the exchange and what is his basis in the Apricot stock he receives?

Accepted Answer

A)  $200,000 loss recognized and a basis in Apricot stock of $200,000 
B)  No loss recognized and a basis in Apricot stock of $400,000 
C)  $200,000 loss recognized and a basis in Apricot stock of $400,000 
D)  No loss recognized and a basis in Apricot stock of $200,000 
A)  $200,000 loss recognized and a basis in Apricot stock of $200,000 
B)  No loss recognized and a basis in Apricot stock of $400,000 
C)  $200,000 loss recognized and a basis in Apricot stock of $400,000 
D)  No loss recognized and a basis in Apricot stock of $200,000

Question 9

The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

Laura recognizes gain of $260,000 on the

Question 11

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?

Accepted Answer

A)  $800 
B)  $600 
C)  $550 
D)  $450 
A)  $800 
B)  $600 
C)  $550 
D)  $450

Question 12

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. $$\begin{array} { l r l r } 
& { \text { FMV } } & & { \text { Adjusted basis } } \
\hline
\text { Inventory } & \$ 30,000 & & \$ 10,000 \
\text { Building } & 130,000 & & 80,000 \
\text { Land } & \underline { 50,000 } & & \underline { 100,000 } \
\text { Total } & \$ 210,000 & & \$ \underline { \underline { 190,000 } }
\end{array}$$ 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?

Accepted Answer

Francine does not recognize an

Question 13

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

Accepted Answer

Pennsylvania has a taxable tra

Question 14

Which of the following statements does not describe a tax consequence to shareholders in a complete liquidation?

Accepted Answer

A)  All complete liquidations are taxable to the shareholders. 
B)  Complete liquidations are taxable to all individual shareholders. 
C)  Complete liquidations are taxable to all corporate shareholders owning stock of the liquidated corporation representing less than 80 percent or more of voting power and value. 
D)  Complete liquidations are tax deferred to corporate shareholders owning stock of the liquidated corporation representing 80 percent or more of voting power and value. 
A)  All complete liquidations are taxable to the shareholders. 
B)  Complete liquidations are taxable to all individual shareholders. 
C)  Complete liquidations are taxable to all corporate shareholders owning stock of the liquidated corporation representing less than 80 percent or more of voting power and value. 
D)  Complete liquidations are tax deferred to corporate shareholders owning stock of the liquidated corporation representing 80 percent or more of voting power and value.

Question 15

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

Accepted Answer

A)  The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals its fair market value. 
B)  The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred. 
C)  The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred. 
D)  The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals zero. 
A)  The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals its fair market value. 
B)  The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred. 
C)  The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred. 
D)  The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals zero.

Question 16

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?

Accepted Answer

A)  $200,000 loss recognized and a basis in Marketing stock of $1,200,000 
B)  No loss recognized and a basis in Marketing stock of $1,200,000 
C)  $200,000 loss recognized and a basis in Marketing stock of $700,000 
D)  No loss recognized and a basis in Marketing stock of $700,000 
A)  $200,000 loss recognized and a basis in Marketing stock of $1,200,000 
B)  No loss recognized and a basis in Marketing stock of $1,200,000 
C)  $200,000 loss recognized and a basis in Marketing stock of $700,000 
D)  No loss recognized and a basis in Marketing stock of $700,000

Question 17

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?

Accepted Answer

Michelle recognizes gain of $200,000 on

Question 18

Which of the following statements does not describe a motivation by the buyer or seller in the acquisition or sale of a company?

Accepted Answer

A)  Buyers generally prefer to buy assets because they can take a tax basis in the assets acquired equal to the assets' fair market value. 
B)  Buyers generally prefer to buy stock because they can take a tax basis in the underlying assets of the company acquired equal to the assets' fair market value. 
C)  Sellers generally prefer to sell assets in a tax-deferred reorganization to avoid higher tax rates imposed on gains from the sale of non-capital assets. 
D)  Sellers generally prefer to sell stock because they can recognize capital gain on the sale taxed at preferential rates. 
A)  Buyers generally prefer to buy assets because they can take a tax basis in the assets acquired equal to the assets' fair market value. 
B)  Buyers generally prefer to buy stock because they can take a tax basis in the underlying assets of the company acquired equal to the assets' fair market value. 
C)  Sellers generally prefer to sell assets in a tax-deferred reorganization to avoid higher tax rates imposed on gains from the sale of non-capital assets. 
D)  Sellers generally prefer to sell stock because they can recognize capital gain on the sale taxed at preferential rates.

A liquidated corporation always recognizes gain realized in a complete liquidation.

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in a transaction.

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

Which of the following statements best describes the tax results to a shareholder in a section 351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value.

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

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

Which of the following statements does not describe a tax consequence to shareholders in a complete liquidation?

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

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?

Which of the following statements does not describe a motivation by the buyer or seller in the acquisition or sale of a company?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

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 US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters

Exam 19: Corporate Formation, Reorganization, and Liquidation

A liquidated corporation always recognizes gain realized in a complete liquidation.

Generally, before gain or loss is realized for tax purposes, the taxpayer must engage in a transaction.

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

Which of the following statements best describes the tax results to a shareholder in a section 351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

The tax basis of property received by a noncorporate shareholder in a complete liquidation will be the property's fair market value.

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

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

Which of the following statements does not describe a tax consequence to shareholders in a complete liquidation?

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

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?

Which of the following statements does not describe a motivation by the buyer or seller in the acquisition or sale of a company?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

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 US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters