Question 1

When a corporation liquidates,it performs three activities.What is the general order of these activities in a plan of liquidation?

Accepted Answer

A) pay debts,distribute property to shareholders,and wind up its affairs 
B) wind up its affairs,distribute property to shareholders,pay debts 
C) pay debts,wind up its affairs,and distribute property to shareholders 
D) wind up its affairs,pay debts,and distribute property to shareholders 
A) pay debts,distribute property to shareholders,and wind up its affairs 
B) wind up its affairs,distribute property to shareholders,pay debts 
C) pay debts,wind up its affairs,and distribute property to shareholders 
D) wind up its affairs,pay debts,and distribute property to shareholders

Question 2

Under the general liquidation rules,Kansas Corporation is liquidated,with Sam Topeka receiving $20,000 in cash plus other property having a $24,000 FMV.Sam Topeka's basis in his Kansas stock is $32,000.What is Sam Topeka's amount realized and gain recognized on the liquidation?

Accepted Answer

Sam Topeka's amount realized i

Question 3

Albert receives a liquidating distribution from Glidden Corporation as part of a complete redemption of its stock.Albert receives cash of $5,000 and other property with an adjusted basis of $6,000 and an FMV of $10,000.Albert's basis in the Glidden stock surrendered is $8,000.How much gain does he recognize?

Accepted Answer

The answer of Albert receives a liquidating distribution from Glidden...

Question 4

The adjusted basis of property received in a complete liquidation is its fair market value on the distribution date.

Accepted Answer

A) True 
 B)False

Question 5

Liquidation of a subsidiary corporation - The liquidating corporation recognizes no gain or loss on liquidating distributions made to a parent corporation that owns at least 80% of the subsidiary's stock.

Accepted Answer

Under U.S. federal tax law, specifically

Question 6

Distributions to related persons - Loss recognition is disallowed when the liquidating corporation makes a distribution to a related person,as defined in Sec.267(b),if (1)the distribution is not pro rata or (2)the property distributed is disqualified property.Disqualified property is property acquired by the corporation in a Sec.351 tax-free formation or as a capital contribution during the five-year period ending on the distribution date or property having an adjusted basis that carries over from a disqualified property.

Accepted Answer

When a liquidating corporation makes a d

Question 7

Are liquidation and dissolution the same? Explain your answer.

Accepted Answer

Liquidation status continues from the ti

Question 8

Liquidation rules generally are applied the same to the following organizations except for

Accepted Answer

A) subsidiary corporations (80% controlled). 
B) C corporations. 
C) S corporations. 
D) subsidiary corporations (less than 80% controlled). 
A) subsidiary corporations (80% controlled). 
B) C corporations. 
C) S corporations. 
D) subsidiary corporations (less than 80% controlled).

Question 9

Greg,a cash method of accounting taxpayer,owns 100 shares of Parker Corporation stock with a basis of $20,000.Greg receives two liquidating distributions of $8,000 on March 3 of last year,and $8,000 on August 8 of this year.The amount of the second distribution is not known until June 15 of this year.Greg recognizes

Accepted Answer

A) a gain of $8,000 last year and a loss of $12,000 this year. 
B) a loss of $2,000 last year and a loss of $2,000 this year. 
C) no loss last year and a $4,000 loss this year. 
D) none of the above 
A) a gain of $8,000 last year and a loss of $12,000 this year. 
B) a loss of $2,000 last year and a loss of $2,000 this year. 
C) no loss last year and a $4,000 loss this year. 
D) none of the above

Question 10

A plan of liquidation

Accepted Answer

A) must be written. 
B) details the steps to be undertaken in carrying out the liquidation. 
C) must be a formal plan. 
D) must be completed in one year. 
A) must be written. 
B) details the steps to be undertaken in carrying out the liquidation. 
C) must be a formal plan. 
D) must be completed in one year.

Question 11

Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?

Accepted Answer

A liquidating corpor

Question 12

Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock last year.Later that same year,Keke sold the pretzel maker for $300.This year,Keke adopted a plan of liquidation.Previously,Keke had never used the pretzel maker in connection with the conduct of its trade or business.The sale was reported on Keke's current tax return.What reporting option does Keke Corporation not have because of its plan of liquidation?

Accepted Answer

A) File an amended tax return for the tax year in which the tax loss was originally claimed. 
B) Recapture the loss on the tax return for the year the plan for liquidation was adopted. 
C) Recognize a gain of $100 for the current year. 
D) none of the above 
A) File an amended tax return for the tax year in which the tax loss was originally claimed. 
B) Recapture the loss on the tax return for the year the plan for liquidation was adopted. 
C) Recognize a gain of $100 for the current year. 
D) none of the above

Question 13

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

Accepted Answer

A) True 
 B)False

Question 14

Robot Corporation is liquidated,with Marty receiving property having an adjusted basis of $60,000 and an FMV of $90,000.The property is subject to an $80,000 mortgage,which Marty assumes.Marty's basis in the Robot stock surrendered is $50,000.Marty must recognize

Accepted Answer

A) a $40,000 loss. 
B) no gain or loss. 
C) a $60,000 gain. 
D) none of the above 
A) a $40,000 loss. 
B) no gain or loss. 
C) a $60,000 gain. 
D) none of the above

Question 15

Carly owns 25% of Base Corporation's single class of stock and Premier Corporation owns the remaining 75%.Carly's basis in the Base stock is $200,000 and Premier Corporation's basis in the Base stock is $600,000.Carly receives property with a $175,000 adjusted basis and a $250,000 FMV and Premier Corporation receives property with a $600,000 adjusted basis and a $750,000 FMV in complete liquidation of Base Corporation.All of Base's cash is used to pay its liabilities.Which of following statements is correct concerning the tax effects of the liquidation?

Accepted Answer

A) Neither Carly nor Premier Corporation will recognize a gain. 
B) Carly will recognize some gain but Premier Corporation will not recognize any gain. 
C) Both Carly and Premier will recognize some gain. 
D) Carly will not recognize any gain but Premier will recognize some gain. 
A) Neither Carly nor Premier Corporation will recognize a gain. 
B) Carly will recognize some gain but Premier Corporation will not recognize any gain. 
C) Both Carly and Premier will recognize some gain. 
D) Carly will not recognize any gain but Premier will recognize some gain.

Question 16

Under a plan of complete liquidation,Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William,a 25% shareholder.William has a $200,000 basis in his Coast stock.The land is inventory in the hands of Coast Corporation.Coast Corporation must recognize

Accepted Answer

A) no gain. 
B) $100,000 of ordinary income. 
C) $100,000 of long-term capital gain. 
D) $200,000 of ordinary income. 
A) no gain. 
B) $100,000 of ordinary income. 
C) $100,000 of long-term capital gain. 
D) $200,000 of ordinary income.

Question 17

Homewood Corporation adopts a plan of liquidation on June 15 and shortly thereafter sells a parcel of land on which it realizes a $50,000 gain (excluding the effects of a $5,000 sales commission).Homewood pays its legal counsel $2,000 to draft the plan of liquidation.The accountant fees for the liquidation are $1,000,which are also paid during the year.What is Homewood Corporation's realized gain on the sale of land and deductible liquidation expenses?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 18

Identify which of the following statements is true.

Accepted Answer

A) A liquidating distribution of property other than a disqualified property that is made ratably to all shareholders (based on their stockholdings)will permit the recognition of loss on the portion of the distribution that is made to a related person. 
B) A subsidiary corporation can recognize losses on distributions to either the parent corporation or minority shareholders in a Sec.332 liquidation. 
C) Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person. 
D) All of the above are false. 
A) A liquidating distribution of property other than a disqualified property that is made ratably to all shareholders (based on their stockholdings)will permit the recognition of loss on the portion of the distribution that is made to a related person. 
B) A subsidiary corporation can recognize losses on distributions to either the parent corporation or minority shareholders in a Sec.332 liquidation. 
C) Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person. 
D) All of the above are false.

Question 19

Specialty Corporation distributes land to one of its shareholders,Sam,as part of a plan of liquidation.The land,which was used in Specialty's business,has an adjusted basis of $50,000 and an FMV of $130,000 on the date of distribution.Sam's basis in Specialty Corporation stock is $100,000.What is the amount and character of the gain/loss recognized by Specialty Corporation? What is the amount and character of the gain/loss recognized by Sam?

Accepted Answer

Specialty recognizes an $80,00

Question 20

Lake Corporation distributes a building used in its business to Sandy in exchange for all of her Lake stock.Sandy's basis in her stock is $30,000 and the property she receives has a $90,000 FMV.As part of the distribution,Sandy assumes a liability associated with the property of $65,000.The property's basis prior to the liquidating distribution was $25,000.What are the tax consequences of the distribution to Sandy? To Lake Corporation?

Accepted Answer

Sandy will recognize a $5,000 capital lo

Exam 6: Corporate Liquidating Distributions

When a corporation liquidates,it performs three activities.What is the general order of these activities in a plan of liquidation?

Under the general liquidation rules,Kansas Corporation is liquidated,with Sam Topeka receiving $20,000 in cash plus other property having a $24,000 FMV.Sam Topeka's basis in his Kansas stock is $32,000.What is Sam Topeka's amount realized and gain recognized on the liquidation?

The adjusted basis of property received in a complete liquidation is its fair market value on the distribution date.

Liquidation of a subsidiary corporation - The liquidating corporation recognizes no gain or loss on liquidating distributions made to a parent corporation that owns at least 80% of the subsidiary's stock.

Are liquidation and dissolution the same? Explain your answer.

Liquidation rules generally are applied the same to the following organizations except for

A plan of liquidation

Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

Robot Corporation is liquidated,with Marty receiving property having an adjusted basis of $60,000 and an FMV of $90,000.The property is subject to an $80,000 mortgage,which Marty assumes.Marty's basis in the Robot stock surrendered is $50,000.Marty must recognize

Under a plan of complete liquidation,Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William,a 25% shareholder.William has a $200,000 basis in his Coast stock.The land is inventory in the hands of Coast Corporation.Coast Corporation must recognize

Identify which of the following statements is true.

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