Exam 7: Corporate Acquisitions and Reorganizations

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

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.

On July 1,in connection with a recapitalization of Yorktown Corporation,Robert Moore exchanges 1,000 shares of Yorktown preferred stock,which cost him $95,000,for 1,000 shares of Yorktown common stock worth $108,000 and bonds having a principal amount of $10,000 and an FMV of $10,500.What is the amount of Moore's realized and recognized gain?

Martha owns Gator Corporation stock having an adjusted basis of $21,000.As part of a tax-free reorganization involving Gator and Baker Corporations,Martha exchanges her Gator stock for $18,000 of Baker stock and $6,000 (face amount and FMV)of Baker securities.What is Martha's basis in the Baker stock?

Identify which of the following statements is true.

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?

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

Pacific Corporation acquires 80% of the stock of Jackson Corporation for $3,000,000 in the current year.Jackson's assets have a basis of $2,000,000 and its liabilities are $800,000.The assets are worth $3,500,000.What gain is recognized by Jackson Corporation on the deemed sale of its assets if a Sec.338 election is made?

Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash.Drexel Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV.The assets are subject to $200,000 in liabilities.Drexel Corporation shareholders purchased their stock eight years ago for $300,000.Axle Corporation's basis in the Drexel Corporation stock is

Table Corporation transfers one-half of its assets to Chair Corporation in exchange for 100% of Chair Corporation's single class of stock.Following the exchange,Table Corporation distributes the Chair stock ratably to its shareholders.This transaction will constitute a

The Sec.338 deemed sale rules require that 70% of the target corporation's stock be owned.

Identify which of the following statements is true.

Identify which of the following statements is true.

Brown Corporation has assets with a $650,000 basis and an $800,000 FMV.The assets are subject to $250,000 in liabilities.Clark Corporation acquires all of Brown's assets and liabilities for $600,000 in cash.Brown Corporation then liquidates.What is Clark Corporation's basis in the acquired assets?

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?

Identify which of the following statements is true.

Paris Corporation has E&P of $200,000.Paris owns all of Slider Corporation's stock,which is worth $80,000.The stock has been held for five years.Paris distributes all of the Slider stock and $20,000 cash to a 50% shareholder in exchange for all of the shareholder's 100 shares of Paris stock.The exchange qualifies as a Sec.355 split-off transaction.The 50% shareholder's basis in the Paris stock surrendered is $90,000.What is the amount of the gain that the 50% shareholder must recognize?

Florida Corporation is 100% owned by Lawton Chiles.Georgia Corporation is 100% owned by Zell Miller.Georgia Corporation acquires on December 31 of the previous year all of Florida Corporation's stock for $5,000,000 in a cash purchase transaction.Both corporations use the calendar year as their tax year.At the time of the acquisition,Florida Corporation had a $500,000 NOL.During the current year,the two corporations file separate tax returns and Florida Corporation reports $700,000 of taxable income.The long-term tax-exempt rate for the period,including the acquisition date is 6%.What is Florida Corporation's taxable income for the current year?

Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization.Brad also receives $6,000 cash as part of the reorganization.How much gain must Brad recognize?