Question 1

If a shareholder owns stock received as a gift from her mother,it cannot be § 1244 stock.

Accepted Answer

A) True 
 B)False

Question 2

George transfers cash of $150,000 to Finch Corporation,a newly formed corporation,for 100% of the stock in Finch worth $80,000 and debt in the amount of $70,000,payable in equal annual installments of $7,000 plus interest at the rate of 9% per annum.In the first year of operation,Finch has net taxable income of $40,000.If Finch pays George interest of $6,300 and $7,000 principal payment on the note:

Accepted Answer

A) George has dividend income of $13,300. 
B) Finch Corporation does not have a tax deduction with respect to the payment. 
C) George has dividend income of $7,000. 
D) Finch Corporation has an interest expense deduction of $6,300. 
E) None of the above. 
A) George has dividend income of $13,300. 
B) Finch Corporation does not have a tax deduction with respect to the payment. 
C) George has dividend income of $7,000. 
D) Finch Corporation has an interest expense deduction of $6,300. 
E) None of the above.

Question 3

Art,an unmarried individual,transfers property (basis of $130,000 and fair market value of $120,000) to Condor Corporation in exchange for §1244 stock.The transfer qualifies as a nontaxable exchange under § 351.Because the property is loss property,Condor takes a basis in the property of $120,000.Five years later,Art sells the Condor stock for $50,000.With respect to the sale,Art has:

Accepted Answer

A) An ordinary loss of $80,000. 
B) An ordinary loss of $70,000 and a capital loss of $10,000. 
C) A capital loss of $80,000. 
D) A capital loss of $30,000 and an ordinary loss of $50,000. 
E) None of the above. 
A) An ordinary loss of $80,000. 
B) An ordinary loss of $70,000 and a capital loss of $10,000. 
C) A capital loss of $80,000. 
D) A capital loss of $30,000 and an ordinary loss of $50,000. 
E) None of the above.

Question 4

Earl and Mary form Crow Corporation.Earl transfers property,basis of $200,000 and value of $1,600,000,for 50 shares in Crow Corporation.Mary transfers property,basis of $80,000 and value of $1,480,000,and agrees to serve as manager of Crow for one year;in return Mary receives 50 shares of Crow.The value of Mary's services is $120,000.With respect to the transfers:

Accepted Answer

A) Mary will not recognize gain or income. 
B) Earl will recognize a gain of $1,400,000. 
C) Crow Corporation has a basis of $1,480,000 in the property it received from Mary. 
D) Crow will have a business deduction of $120,000 for the value of the services Mary will render. 
E) None of the above. 
A) Mary will not recognize gain or income. 
B) Earl will recognize a gain of $1,400,000. 
C) Crow Corporation has a basis of $1,480,000 in the property it received from Mary. 
D) Crow will have a business deduction of $120,000 for the value of the services Mary will render. 
E) None of the above.

Question 5

In a § 351 transfer,a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000.Only $7,000 of the boot will be taxed to the shareholder.

Accepted Answer

A) True 
 B)False

Question 6

Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000.Gold assumes Albert's mortgage on the land of $200,000.

Accepted Answer

A) Albert has a recognized gain on the transfer of $140,000. 
B) Albert has a recognized gain on the transfer of $80,000. 
C) Albert has a recognized gain on the transfer of $60,000. 
D) Gold Corporation has a basis in the land of $220,000. 
E) None of the above. 
A) Albert has a recognized gain on the transfer of $140,000. 
B) Albert has a recognized gain on the transfer of $80,000. 
C) Albert has a recognized gain on the transfer of $60,000. 
D) Gold Corporation has a basis in the land of $220,000. 
E) None of the above.

Question 7

Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000.Even though § 351 applies,Tina may recognize her realized loss of $10,000.

Accepted Answer

A) True 
 B)False

Question 8

Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000),executed by Green Corporation and made payable to Jane.As a result of the transfer:

Accepted Answer

A) Jane recognizes no gain. 
B) Jane recognizes a gain of $75,000. 
C) Jane recognizes a gain of $270,000. 
D) Jane recognizes a gain of $320,000. 
E) None of the above. 
A) Jane recognizes no gain. 
B) Jane recognizes a gain of $75,000. 
C) Jane recognizes a gain of $270,000. 
D) Jane recognizes a gain of $320,000. 
E) None of the above.

Question 9

A taxpayer transfers assets and liabilities to a corporation in return for its stock.If the liabilities exceed the basis of the assets transferred,the taxpayer will have a negative basis in the stock.

Accepted Answer

A) True 
 B)False

Question 10

George (an 80% shareholder) has made loans to Mountainview Corporation that become worthless in the current year.George is not employed by Mountainview.

Accepted Answer

A) George is not permitted a deduction for the worthless loans. 
B) The loans provide a nonbusiness bad debt deduction to George in the current year. 
C) The loans provide George with a business bad debt deduction. 
D) George may claim an ordinary loss as to the worthless loans. 
E) None of the above. 
A) George is not permitted a deduction for the worthless loans. 
B) The loans provide a nonbusiness bad debt deduction to George in the current year. 
C) The loans provide George with a business bad debt deduction. 
D) George may claim an ordinary loss as to the worthless loans. 
E) None of the above.

Question 11

A shareholder transfers a capital asset to Red Corporation for its stock.If the transfer qualifies under § 351,Red's holding period for the asset begins on the day of the exchange.

Accepted Answer

A) True 
 B)False

Question 12

How is the transfer of liabilities in a property transaction generally treated for tax purposes? How is a transfer of liabilities generally treated in a § 351 transaction? What exceptions could arise to this usual treatment in a § 351 setting?

Accepted Answer

Generally when another party assumes a l

Question 13

When a taxpayer transfers property subject to a mortgage to a controlled corporation in an exchange qualifying under § 351,the transferor shareholder's basis in stock received in the transferee corporation is increased by the amount of the mortgage on the property.

Accepted Answer

A) True 
 B)False

If a shareholder owns stock received as a gift from her mother,it cannot be § 1244 stock.

In a § 351 transfer,a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000.Only $7,000 of the boot will be taxed to the shareholder.

Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000.Gold assumes Albert's mortgage on the land of $200,000.

Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000.Even though § 351 applies,Tina may recognize her realized loss of $10,000.

Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000),executed by Green Corporation and made payable to Jane.As a result of the transfer:

A taxpayer transfers assets and liabilities to a corporation in return for its stock.If the liabilities exceed the basis of the assets transferred,the taxpayer will have a negative basis in the stock.

George (an 80% shareholder) has made loans to Mountainview Corporation that become worthless in the current year.George is not employed by Mountainview.

A shareholder transfers a capital asset to Red Corporation for its stock.If the transfer qualifies under § 351,Red's holding period for the asset begins on the day of the exchange.

How is the transfer of liabilities in a property transaction generally treated for tax purposes? How is a transfer of liabilities generally treated in a § 351 transaction? What exceptions could arise to this usual treatment in a § 351 setting?

When a taxpayer transfers property subject to a mortgage to a controlled corporation in an exchange qualifying under § 351,the transferor shareholder's basis in stock received in the transferee corporation is increased by the amount of the mortgage on the property.

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 18: Corporations: Organization and Capital Structure

If a shareholder owns stock received as a gift from her mother,it cannot be § 1244 stock.

In a § 351 transfer,a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000.Only $7,000 of the boot will be taxed to the shareholder.

Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000.Gold assumes Albert's mortgage on the land of $200,000.

Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000.Even though § 351 applies,Tina may recognize her realized loss of $10,000.

Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000),executed by Green Corporation and made payable to Jane.As a result of the transfer:

A taxpayer transfers assets and liabilities to a corporation in return for its stock.If the liabilities exceed the basis of the assets transferred,the taxpayer will have a negative basis in the stock.

George (an 80% shareholder) has made loans to Mountainview Corporation that become worthless in the current year.George is not employed by Mountainview.

A shareholder transfers a capital asset to Red Corporation for its stock.If the transfer qualifies under § 351,Red's holding period for the asset begins on the day of the exchange.

How is the transfer of liabilities in a property transaction generally treated for tax purposes? How is a transfer of liabilities generally treated in a § 351 transaction? What exceptions could arise to this usual treatment in a § 351 setting?

When a taxpayer transfers property subject to a mortgage to a controlled corporation in an exchange qualifying under § 351,the transferor shareholder's basis in stock received in the transferee corporation is increased by the amount of the mortgage on the property.

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

Filters