Exam 7: Corporate Acquisitions and Reorganizations

Acquiring Corporation is 100%-owned by Peter Hart.Target Corporation is 100% owned by Dick Weber.The two individuals are not related.Target Corporation has $400,000 of NOL carryovers at the time Acquiring Corporation is considering making a cash acquisition of part or all of Target Corporation's stock.What is the maximum amount of Target stock that can be acquired in a single transaction without the Sec.382 loss limitation rules applying to the NOLs?

Identify which of the following statements is false.

The acquiring corporation does not recognize gain or loss in a reorganization where it receives boot.

The assets of Bold Corporation have a $1,000,000 basis and a $3,000,000 FMV.Its liabilities are $500,000.Tidel Corporation acquires 80% of the Bold Corporation stock for $2,000,000.What gain is recognized by Bold Corporation if a timely Sec.338 election is made by Tidel Corporation? What is the total basis of the assets to Bold Corporation following the deemed sale? Assume a 34% corporate tax rate.

Briefly describe A,B,C,D,and G reorganization types.

The acquiring corporation does not obtain the target corporation's tax attributes in

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

Acquiring Corporation acquires all of the stock of Target Corporation in a Type B (stock-for-stock)reorganization.Both corporations have always filed separate tax returns.Which one of the following statements regarding the acquisition is correct?

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 Duke Corporation's basis in the assets it receives?

Identify which of the following statements is true.

Define the seven classes of assets used in allocating basis when using the residual method.

Gulf Corporation wants to acquire all of Beamer Corporation's assets and liabilities in a Type C reorganization.The FMV of Beamer's assets is $500,000.Beamer's liabilities are $70,000.How much cash can Gulf Corporation use to pay for Beamer's assets without violating the Type C reorganization requirements?

Rock Corporation acquires all of the assets of Stone Corporation using only its voting stock.Stone Corporation distributes the Rock stock to its shareholders pursuant to its liquidation.After the acquisition,Stone Corporation's shareholders own 20% of the Rock stock (by voting power and value).The transaction is classified as a

Type A reorganizations include mergers and consolidations.

American Corporation acquires the noncash assets of Utech Corporation in exchange for $700,000 of its voting stock plus $50,000 of cash.Utech Corporation assets are worth $750,000.Utech Corporation does not distribute the stock and cash but instead holds the stock as an investment.Utech will use the American cash along with the cash it retained to start a new business.The transaction can be classified as a

In a Type B reorganization,the 1.stock of the target corporation is acquired solely for the voting stock of either the acquiring corporation or its parent. 2.acquiring corporation must have control of the target corporation immediately after the acquisition.

John Van Kirk owns all the stock of Monmouth Restaurant Corporation in Pittsburgh.John would like to sell his business and retire to sunny Florida now that he has turned 65.Pam,a long-time bartender at Monmouth Restaurant,offers to purchase all the business's noncash assets in exchange for a 25% down payment,with the remaining 75% being paid in five equal annual installments.Interest will be charged at a 10% rate on the unpaid installments.John plans to liquidate the corporation that has operated the restaurant and have Monmouth Restaurant distribute the installment notes and any remaining assets.What tax issues should Monmouth Restaurant,John,and Pam consider with respect to the purchase transaction?

In which of the following reorganizations does the distributing corporation transfer all of its assets to two controlled corporations before the distributing corporation dissolves?

Identify which of the following statements is true.