Exam 7: Corporate Acquisitions and Reorganizations

Town Corporation acquires all of the stock of Country Corporation in June in exchange for Town voting common stock.Both Town and Country use a calendar year as their tax year.In the following January,Country pays all of its liabilities and distributes its remaining assets to Town pursuant to its liquidation.These assets consist of $50,000 in cash and land having a $30,000 FMV and a $10,000 basis to Country.Upon distribution of Country's assets to Town,all of Country's capital stock is canceled.Town's basis for the Country stock prior to the liquidation was $57,000.What is the amount and character of Town's recognized gain on receipt of Country's assets pursuant to the liquidation?

Identify which of the following statements is true.

In a nontaxable reorganization,the acquiring corporation has a holding period for the acquired assets that begins on the day after the transaction date.

Shareholders in Boxer Corporation exchange all of their nonvoting Class B common stock for additional shares of Boxer's Class A common stock.Which of the following statements is correct?

Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year.Melon Corporation uses a calendar tax year.To use the Sec.338 election,Melon Corporation must purchase

When gain is realized by a target corporation from disposing of its assets in a tax-free reorganization,the gain is

Johnson Co.transferred part of its assets to Alive Corporation in exchange for all of Alive's stock.The Alive stock received for the assets was distributed to the Johnson shareholders.What tax issues should the parties to the divisive reorganization consider?

Grand Corporation transfers 40% of its assets having an adjusted basis of $600,000 and an FMV of $800,000 to New Corporation in exchange for 75% of its single class of stock.Grand Corporation is owned equally by Annie and Betsy who are unrelated.Annie's basis for her Grand stock is $300,000 and Betsy's basis is $400,000.Annie exchanges all of her Grand stock for all of the New stock received in the exchange.Which of the following statements is correct concerning these transactions?