Question 1

In a complete liquidation of a corporation,which of the following is false?

Accepted Answer

A)  All stock of the liquidating corporation is canceled or redeemed. 
B)  The corporation ceases to be a going concern. 
C)  The corporation divests itself of substantially all its properties. 
D)  The liquidation of a corporation means it has undergone dissolution. 
A)  All stock of the liquidating corporation is canceled or redeemed. 
B)  The corporation ceases to be a going concern. 
C)  The corporation divests itself of substantially all its properties. 
D)  The liquidation of a corporation means it has undergone dissolution. D

Question 2

A subsidiary recognizes no gain or loss on a distribution to a parent corporation owning the majority of the subsidiary's stock in a complete liquidation.

Accepted Answer

A) True 
 B)False  False

Question 3

Liquidation and dissolution have the same legal meaning.

Accepted Answer

A) True 
 B)False  False

Question 4

The general rule for tax attributes of liquidating corporations is

Accepted Answer

A)  they disappear when the liquidation is complete. 
B)  they carry over for five years. 
C)  they disappear only for controlled subsidiary corporations. 
D)  they carry over for an indefinite period of time. 
A)  they disappear when the liquidation is complete. 
B)  they carry over for five years. 
C)  they disappear only for controlled subsidiary corporations. 
D)  they carry over for an indefinite period of time.

Question 5

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 6

Jack has a basis of $36,000 in his 1,000 shares of Acorn Corporation stock (a capital asset).The stock was acquired three years ago.He receives the following distributions as part of a plan of liquidation of Acorn Corporation:
   What are the amount and character of the gain or loss that Jack will recognize during 2009? During 2010?

Accepted Answer

Because Jack's $36,000 basis has not bee

Question 7

During 2013,Track Corporation distributes property to Cindy as part of a complete liquidation.Property included in the distribution is $30,000 in cash,land with a $40,000 adjusted basis and a $60,000 FMV,and a copyright without an ascertainable FMV and having a zero basis.The first payment to Cindy of $8,000 for use of the copyrighted property occurs in 2014.Cindy has a basis in the Track stock of $95,000 immediately preceding the liquidation.The minimum amount of gain that Cindy must recognize is a

Accepted Answer

A)  $3,000 gain in 2014. 
B)  $0 gain in 2013. 
C)  $3,000 gain in 2013, which is reported on an amended current-year tax return that is filed in 2014. 
D)  none of the above 
A)  $3,000 gain in 2014. 
B)  $0 gain in 2013. 
C)  $3,000 gain in 2013, which is reported on an amended current-year tax return that is filed in 2014. 
D)  none of the above

Question 8

Parent Corporation owns 100% of the stock of Subsidiary Corporation.The adjusted basis of its stock investment is $100,000.A plan of liquidation is adopted.Subsidiary distributes to Parent assets with a $325,000 FMV and a $275,000 adjusted basis.Subsidiary also distributes liabilities in the amount of $40,000.Subsidiary has a $150,000 E&P balance.
a)What is the amount and character of Subsidiary Corporation's recognized gain or loss on the distribution?
b)What is the amount and character of Parent Corporation's recognized gain or loss on the redemption of the Subsidiary stock?
c)What basis does Parent take in the assets?
d)What happens to parent Corporation's basis in the Subsidiary stock and to Subsidiary's tax attributes?

Accepted Answer

a)$325,000 - $275,000 = $50,000 realized

Question 9

Parent Corporation owns 70% of Sam Corporation's single class of stock.This year,Parent Corporation purchases for cash the remaining 30% of Sam Corporation's stock from four individual investors pursuant to a tender offer.A plan of liquidation is approved by Sam Corporation's shareholders during the last month of this year,and Sam Corporation's assets are distributed by year-end to Parent Corporation in exchange for all of Sam's outstanding stock.Parent Corporation should

Accepted Answer

A)  not recognize any gains and losses on the redemption. 
B)  recognize gains and losses on the redemption. 
C)  recognize gains but not losses on the redemption. 
D)  recognize losses but not gains on the redemption. 
A)  not recognize any gains and losses on the redemption. 
B)  recognize gains and losses on the redemption. 
C)  recognize gains but not losses on the redemption. 
D)  recognize losses but not gains on the redemption.

Question 10

Lake City Corporation owns all of the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Lake City's basis in the land will be

Accepted Answer

A)  0. 
B)  $200,000. 
C)  $500,000. 
D)  cannot be determined from the facts presented 
A)  0. 
B)  $200,000. 
C)  $500,000. 
D)  cannot be determined from the facts presented

Question 11

What event determines when a cash or accrual method of accounting taxpayer reports a liquidating distribution?

Accepted Answer

A shareholder who uses the accrual metho

Question 12

Identify which of the following statements is true.

Accepted Answer

A)  The method of accounting used by shareholders involved in a complete liquidation is relevant when determining the year in which the shareholder's gain or loss should be reported. 
B)  An accrual method of accounting taxpayer recognizes his/her realized gain on a corporate liquidation when there has been actual or constructive receipt of the liquidating distribution(s). 
C)  If a shareholder assumes or acquires liabilities of the liquidating corporation, the amount of these liabilities does not reduce the amount realized by the shareholder. 
D)  All of the above are false. 
A)  The method of accounting used by shareholders involved in a complete liquidation is relevant when determining the year in which the shareholder's gain or loss should be reported. 
B)  An accrual method of accounting taxpayer recognizes his/her realized gain on a corporate liquidation when there has been actual or constructive receipt of the liquidating distribution(s). 
C)  If a shareholder assumes or acquires liabilities of the liquidating corporation, the amount of these liabilities does not reduce the amount realized by the shareholder. 
D)  All of the above are false.

Question 13

Identify which of the following statements is false.

Accepted Answer

A)  Minority shareholders involved in a Sec. 332 subsidiary liquidation must recognize a gain or loss under the Sec. 331 general liquidation rules. 
B)  The parent corporation takes a basis in property received when liquidating a subsidiary corporation in a Sec. 332 liquidation equal to its basis to the subsidiary corporation. 
C)  Section 332 is applicable to both the parent corporation and the minority shareholders if they exist. 
D)  Property received by a minority shareholder takes a basis equal to its fair market value. 
A)  Minority shareholders involved in a Sec. 332 subsidiary liquidation must recognize a gain or loss under the Sec. 331 general liquidation rules. 
B)  The parent corporation takes a basis in property received when liquidating a subsidiary corporation in a Sec. 332 liquidation equal to its basis to the subsidiary corporation. 
C)  Section 332 is applicable to both the parent corporation and the minority shareholders if they exist. 
D)  Property received by a minority shareholder takes a basis equal to its fair market value.

Question 14

In general,a noncorporate shareholder that receives a distribution in complete liquidation of the liquidating corporation recognizes his or her entire realized gain as a capital gain.

Accepted Answer

A) True 
 B)False

Question 15

What are the tax consequences of a cash-method shareholder,subsequent to a liquidation,if obligated to pay a contingent liability of the liquidated corporation?

Accepted Answer

No amendment is made to the prior year's

Question 16

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

Accepted Answer

A corporation that is 100% owned by anot

Question 17

Identify which of the following statements is false.

Accepted Answer

A)  The tax attributes of the liquidating corporation carry over to the shareholders when the liquidation is conducted under the general liquidation rules. 
B)  Baker Corporation was formed in a Sec. 351 exchange three years ago by Emil, Fred, and George who own equal stock interests. The corporation can be liquidated tax-free under the special liquidation rules of Secs. 332 and 337. 
C)  The terms "liquidation" and "dissolution" are synonymous. 
D)  All of the above are false. 
A)  The tax attributes of the liquidating corporation carry over to the shareholders when the liquidation is conducted under the general liquidation rules. 
B)  Baker Corporation was formed in a Sec. 351 exchange three years ago by Emil, Fred, and George who own equal stock interests. The corporation can be liquidated tax-free under the special liquidation rules of Secs. 332 and 337. 
C)  The terms "liquidation" and "dissolution" are synonymous. 
D)  All of the above are false.

Question 18

The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.

Accepted Answer

A) True 
 B)False

Question 19

Penny,a cash-basis taxpayer,reported a $15,000 long-term capital gain on the exchange of her Midwest Corporation stock when the corporation liquidated in 2012.Midwest subsequently lost a lawsuit and Penny paid an additional $3,000 in 2014 as her part of the settlement.What are the tax consequences to Penny in 2014 of the $3,000 additional payment she made?

Accepted Answer

The $3,000 that she

Question 20

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.

In a complete liquidation of a corporation,which of the following is false?

A subsidiary recognizes no gain or loss on a distribution to a parent corporation owning the majority of the subsidiary's stock in a complete liquidation.

Liquidation and dissolution have the same legal meaning.

The general rule for tax attributes of liquidating corporations is

Lake City Corporation owns all of the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Lake City's basis in the land will be

What event determines when a cash or accrual method of accounting taxpayer reports a liquidating distribution?

Identify which of the following statements is true.

Identify which of the following statements is false.

In general,a noncorporate shareholder that receives a distribution in complete liquidation of the liquidating corporation recognizes his or her entire realized gain as a capital gain.

What are the tax consequences of a cash-method shareholder,subsequent to a liquidation,if obligated to pay a contingent liability of the liquidated corporation?

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

Identify which of the following statements is false.

The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

US Taxation of Foreign-Related Transactions

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Exam 6: Corporate Liquidating Distributions

In a complete liquidation of a corporation,which of the following is false?

A subsidiary recognizes no gain or loss on a distribution to a parent corporation owning the majority of the subsidiary's stock in a complete liquidation.

Liquidation and dissolution have the same legal meaning.

The general rule for tax attributes of liquidating corporations is

Lake City Corporation owns all of the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Lake City's basis in the land will be

What event determines when a cash or accrual method of accounting taxpayer reports a liquidating distribution?

Identify which of the following statements is true.

Identify which of the following statements is false.

In general,a noncorporate shareholder that receives a distribution in complete liquidation of the liquidating corporation recognizes his or her entire realized gain as a capital gain.

What are the tax consequences of a cash-method shareholder,subsequent to a liquidation,if obligated to pay a contingent liability of the liquidated corporation?

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

Identify which of the following statements is false.

The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.

Identify which of the following statements is true.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

US Taxation of Foreign-Related Transactions

Filters