Question 1

Identify which of the following statements is true.

Accepted Answer

A) The step-transaction doctrine has always been used by the IRS to convert a tax-free transaction into a taxable transaction. 
B) Tax attributes carry over from the target corporation to the acquiring corporation in all acquisitive reorganizations. 
C) In a Type A reorganization,the net operating loss carryover can be used by the acquiring corporation without limitation in its first tax year that ends after the acquisition date. 
D) All of the above are false. 
A) The step-transaction doctrine has always been used by the IRS to convert a tax-free transaction into a taxable transaction. 
B) Tax attributes carry over from the target corporation to the acquiring corporation in all acquisitive reorganizations. 
C) In a Type A reorganization,the net operating loss carryover can be used by the acquiring corporation without limitation in its first tax year that ends after the acquisition date. 
D) All of the above are false.

Question 2

There are no questions for this section.

Accepted Answer

As the input statement "There are no que

Question 3

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered,the difference may be

Accepted Answer

A) a contribution to capital. 
B) compensation for services. 
C) a dividend. 
D) All of the above are correct. 
A) a contribution to capital. 
B) compensation for services. 
C) a dividend. 
D) All of the above are correct.

Question 4

Type A reorganizations include mergers and consolidations.

Accepted Answer

A) True 
 B)False

Question 5

Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

Accepted Answer

A) True 
 B)False

Question 6

Identify which of the following statements is true.

Accepted Answer

A) The control requirement for Sec.355 differs from the control requirement under Sec.351. 
B) Aspect Corporation transfers assets to newly created Expert Corporation in exchange for all of Expert's stock.Shortly after the transfer,Aspect exchanges one-half of the Expert stock that it receives for land.The individuals transferring the land have never been Aspect shareholders.This transaction qualifies as a divisive Type D reorganization and is tax-free to all parties. 
C) Common stock can be exchanged for preferred stock in the same corporation as a Type E reorganization. 
D) All of the above are false. 
A) The control requirement for Sec.355 differs from the control requirement under Sec.351. 
B) Aspect Corporation transfers assets to newly created Expert Corporation in exchange for all of Expert's stock.Shortly after the transfer,Aspect exchanges one-half of the Expert stock that it receives for land.The individuals transferring the land have never been Aspect shareholders.This transaction qualifies as a divisive Type D reorganization and is tax-free to all parties. 
C) Common stock can be exchanged for preferred stock in the same corporation as a Type E reorganization. 
D) All of the above are false.

Question 7

In a triangular Type A merger,the acquiring subsidiary corporation must obtain substantially all of the target corporation's assets.

Accepted Answer

A) True 
 B)False

Question 8

Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock.Stone Corporation distributes the Rock stock to its shareholders pursuant to its liquidation.After the acquisition,Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value).The transaction is classified as a

Accepted Answer

A) Type B reorganization. 
B) Type C reorganization. 
C) Type D reorganization. 
D) The transaction does not qualify as a tax-free reorganization. 
A) Type B reorganization. 
B) Type C reorganization. 
C) Type D reorganization. 
D) The transaction does not qualify as a tax-free reorganization.

Question 9

Identify which of the following statements is true.

Accepted Answer

A) Able Corporation (New York)transfers its assets to Able Corporation (Delaware)in exchange for all of its stock.Able Corporation (New York)is liquidated.This exchange is a Type F reorganization. 
B) Strict adherence to legislative guidelines with regard to reorganizations is sufficient for tax-free treatment. 
C) A suitable business purpose for a tax-free reorganization is to permit the minimization of shareholder taxes. 
D) All of the above are false. 
A) Able Corporation (New York)transfers its assets to Able Corporation (Delaware)in exchange for all of its stock.Able Corporation (New York)is liquidated.This exchange is a Type F reorganization. 
B) Strict adherence to legislative guidelines with regard to reorganizations is sufficient for tax-free treatment. 
C) A suitable business purpose for a tax-free reorganization is to permit the minimization of shareholder taxes. 
D) All of the above are false.

Question 10

In a Type B reorganization,the acquiring corporation obtains substantially all of the target corporation's assets in exchange for its voting stock and a limited amount of other consideration.

Accepted Answer

A) True 
 B)False

Question 11

In a nontaxable reorganization,the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered.

Accepted Answer

A) True 
 B)False

Question 12

In a Type B reorganization,the target corporation exchange their stock for the acquiring corporation's voting stock,and the target corporation remains in existence as the acquiring corporation's subsidiary.

Accepted Answer

A) True 
 B)False

Question 13

Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000.The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation.Frank's basis in the Baxter stock he surrenders is $120,000.What is Frank's basis in the Duke stock he receives?

Accepted Answer

The correct answer is $120,000

Question 14

WorldCom is a telecommunications company that provides national and international service to local and long-distance customers.On September 14,1998,WorldCom acquired MCI Communications Corporation (MCI)pursuant to a merger agreement.The acquisition can be divided into three stages:

Accepted Answer

The answer of WorldCom is a telecommunications company that provides...

Question 15

Identify which of the following statements is true.

Accepted Answer

A) Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an increased basis for the target corporation's assets on its books. 
B) Acquisition of 100% of the stock of a target corporation in a taxable transaction followed by a tax-free liquidation of the target corporation permits a step-up in the basis of the target corporation's assets to their FMV. 
C) Usually when 100% of the stock of a target corporation is purchased by an acquiring corporation,the basis of the assets of the target corporation reflects the purchase price of the target stock. 
D) All of the above are false. 
A) Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an increased basis for the target corporation's assets on its books. 
B) Acquisition of 100% of the stock of a target corporation in a taxable transaction followed by a tax-free liquidation of the target corporation permits a step-up in the basis of the target corporation's assets to their FMV. 
C) Usually when 100% of the stock of a target corporation is purchased by an acquiring corporation,the basis of the assets of the target corporation reflects the purchase price of the target stock. 
D) All of the above are false.

Question 16

What are the advantages of a triangular merger?

Accepted Answer

See C:7-24

Question 17

Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting preferred stock and $200,000 (face amount and FMV)of securities.The assets have an adjusted basis of $600,000 and an FMV of $1,500,000.In addition,Acme Corporation assumes $500,000 of Fisher's liabilities.At the time of the transfer,Acme's E&P is $400,000.Fisher distributes the stock and securities to its sole shareholder Barbara for all of her Fisher stock.After the reorganization,Barbara owns 25% of Acme's stock.Barbara has an adjusted basis of $400,000 in her Fisher stock.What is Barbara's basis for her Acme stock?

Accepted Answer

The answer of Acme Corporation acquires Fisher Corporation's assets in...

Question 18

What are the advantages and disadvantages of a merger transaction?

Accepted Answer

See C:7-23

Question 19

What are the two steps of a Sec.338 deemed liquidation election?

Accepted Answer

First,the target corporation's sharehold

Question 20

In Fall 1999,Ford Motor Company's board of directors announced the $25.8 billion spin-off of its 80.7% interest in the Associated First Capital Corporation finance unit to the Ford shareholders.Ford said that it would distribute about $22.7 billion in Associates shares to its holders of Ford common and Class B stock,and $3.1 billion in cash to shareholders who hold Ford stock in U.S.employee savings accounts.According to market observers who track Ford operations,the spin-off is one of several moves Ford has taken to increase shareholder value by selling off nonautomotive assets,moves that included the initial public offering in April 1999 of Hertz Corporation.Ford said that it will take a one-time,noncash,nontaxable gain of about $16.5 billion in the first quarter as a result of the spin-off.What tax issues should the parties to the divisive transaction consider?

Accepted Answer

The following issues need to be addresse

Exam 7: Corporate Acquisitions and Reorganizations

Identify which of the following statements is true.

There are no questions for this section.

If the FMV of the stock received in a Type E reorganization does not equal the FMV of the stock surrendered,the difference may be

Type A reorganizations include mergers and consolidations.

Taxable acquisition transactions can either be a purchase of assets or a purchase of stock.

Identify which of the following statements is true.

In a triangular Type A merger,the acquiring subsidiary corporation must obtain substantially all of the target corporation's assets.

Identify which of the following statements is true.

In a Type B reorganization,the acquiring corporation obtains substantially all of the target corporation's assets in exchange for its voting stock and a limited amount of other consideration.

In a nontaxable reorganization,the holding period for the stock received by the target shareholders includes the holding period of the stock surrendered.

In a Type B reorganization,the target corporation exchange their stock for the acquiring corporation's voting stock,and the target corporation remains in existence as the acquiring corporation's subsidiary.

WorldCom is a telecommunications company that provides national and international service to local and long-distance customers.On September 14,1998,WorldCom acquired MCI Communications Corporation (MCI)pursuant to a merger agreement.The acquisition can be divided into three stages:

Identify which of the following statements is true.

What are the advantages of a triangular merger?

What are the advantages and disadvantages of a merger transaction?

What are the two steps of a Sec.338 deemed liquidation election?

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