Exam 7: Corporate Acquisitions and Reorganizations

Zebra Corporation transfers assets with a $120,000 basis and a $250,000 FMV to Hat Corporation for common stock worth $200,000 and cash of $50,000.The exchange qualifies as a tax-free reorganization.Zebra Corporation distributes the stock and cash to its shareholders pursuant to its liquidation.How much gain must Zebra Corporation recognize?

In a nontaxable reorganization,shareholders of the target corporation recognize gain or loss.

As part of a plan of corporate reorganization,Sally exchanged 1,000 shares of Tone Corporation common stock that she had purchased for $85,000,for 3,000 shares of Fade Corporation voting common stock having an $87,000 FMV.What is the amount and character of Sally's recognized gain and her basis in the Tone stock as a result of the exchange?

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.Barbara must recognize a gain of

Identify which of the following statements is true.

Which one of the following is not a corporate reorganization as defined in the Internal Revenue Code?

Grant Corporation transfers highly appreciated stock to Subsidiary Corporation in exchange for all of its stock.The Subsidiary Corporation stock is distributed to its sole shareholder,Peter.Three weeks after the distribution of the Subsidiary stock,Subsidiary Corporation liquidates.Peter then sells the appreciated stock that he received in the liquidation.This series of transactions

Paper Corporation adopts a plan of reorganization and exchanges 1,000 shares of its voting stock and $50,000 in cash for Chase Corporation's assets having a $200,000 adjusted basis and a $275,000 FMV.Chase Corporation is subsequently liquidated.What is Paper Corporation's basis in the assets acquired in the exchange?

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.Barbara's basis for her Acme securities is

Identify which of the following statements is true.

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?

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?

Parent Corporation purchases all of Target Corporation's stock for $200,000 and makes a deemed liquidation election.Target Corporation has Class I assets with an adjusted basis of $55,000 and an FMV of $55,000; Class II assets with an adjusted basis of $40,000 and an FMV of $60,000; and Class V assets with an adjusted basis of $70,000 and an FMV of $100,000.The Class V assets are subject to a $20,000 liability.Assume a 34% corporate tax rate.What is the adjusted grossed-up basis of Target Corporation's stock?

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?

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

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

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?

Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation.Immediately after the incorporation,Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock.Motor Corporation is liquidated.Which of the following statements is correct?

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

Identify which of the following statements is false.