Question 1

Identify which of the following statements is true.

Accepted Answer

A)  With limited exceptions, a loss can be recognized by a liquidating corporation when it makes a liquidating distribution of property that has declined in value. 
B)  When computing the corporate-level gain on a liquidating distribution, the FMV of the property cannot exceed the liability assumed or acquired by the shareholder. 
C)  The FMV of property distributed by a liquidating corporation can be less than the amount of the liability assumed or acquired by the shareholder. 
D)  All of the above are false. 
A)  With limited exceptions, a loss can be recognized by a liquidating corporation when it makes a liquidating distribution of property that has declined in value. 
B)  When computing the corporate-level gain on a liquidating distribution, the FMV of the property cannot exceed the liability assumed or acquired by the shareholder. 
C)  The FMV of property distributed by a liquidating corporation can be less than the amount of the liability assumed or acquired by the shareholder. 
D)  All of the above are false.

Question 2

Bluebird Corporation owns and operates busses and has decided to liquidate its operations.Victor,who owns 80% of the company's stock,will receive all of the busses,repair parts inventory,and all tools and equipment.He plans to start a bus company in another town.Penny,who owns 20% of the stock,wants nothing to do with the new bus business and will receive a cash distribution.Bluebird will incur about $20,000 of expenses in connection with the liquidation.What tax issues should Victor,Penny,and Bluebird consider with respect to the liquidation?

Accepted Answer

Penny and Victor should consider the fol

Question 3

Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person.

Accepted Answer

A) True 
 B)False

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  The loss realized on the sale of a property is disallowed when such property was received by a corporation as a contribution of capital in a transaction having as its principal purpose the recognition of loss pursuant to the corporation's subsequent liquidation later in the same taxable year. 
B)  Losses claimed in a tax return filed before the adoption of the plan of liquidation are not restricted by Sec. 336(d)(2). 
C)  Properties acquired by a liquidating corporation as a capital contribution occurring within three years of the adoption of a plan of liquidation are generally presumed to have a tax avoidance motive. 
D)  All of the above are false. 
A)  The loss realized on the sale of a property is disallowed when such property was received by a corporation as a contribution of capital in a transaction having as its principal purpose the recognition of loss pursuant to the corporation's subsequent liquidation later in the same taxable year. 
B)  Losses claimed in a tax return filed before the adoption of the plan of liquidation are not restricted by Sec. 336(d)(2). 
C)  Properties acquired by a liquidating corporation as a capital contribution occurring within three years of the adoption of a plan of liquidation are generally presumed to have a tax avoidance motive. 
D)  All of the above are false.

Question 5

In a complete liquidation,a liability assumed by a shareholder reduces the shareholder's amount realized.

Accepted Answer

A) True 
 B)False

Question 6

Identify which of the following statements is true.

Accepted Answer

A)  Upon liquidation, any capitalized expenditures unamortized at the time of liquidation should be deducted if they have no further value to the corporation. 
B)  Shareholders who receive an installment obligation as part of their liquidating distribution ordinarily report the FMV of their obligation as part of the consideration received to calculate the amount of recognized gain or loss. 
C)  A liquidating corporation treats expenses associated with selling its property as an offset against the sales proceeds. 
D)  All the above are true. 
A)  Upon liquidation, any capitalized expenditures unamortized at the time of liquidation should be deducted if they have no further value to the corporation. 
B)  Shareholders who receive an installment obligation as part of their liquidating distribution ordinarily report the FMV of their obligation as part of the consideration received to calculate the amount of recognized gain or loss. 
C)  A liquidating corporation treats expenses associated with selling its property as an offset against the sales proceeds. 
D)  All the above are true.

Question 7

Lake City Corporation owns all 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.Columbia's gain with respect to the distribution will be

Accepted Answer

A)  no gain recognized. 
B)  $200,000. 
C)  $300,000. 
D)  $500,000. 
A)  no gain recognized. 
B)  $200,000. 
C)  $300,000. 
D)  $500,000.

Question 8

Prime Corporation liquidates its 85%-owned subsidiary Bass Corporation under the provisions of Secs.332 and 337.Bass Corporation distributes land to its minority shareholder,John,who owns a 15% interest.The property received by John has a $55,000 FMV.The land was used in the Bass Corporation's business and has a $65,000 adjusted basis and is subject to a $10,000 liability,which is assumed by John.John's basis in his stock is $25,000.What gain or loss will John and Bass Corporation recognize on the distribution of the land?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

Under a plan of complete liquidation,Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William,a 25% shareholder.William has a $200,000 basis in his Coast stock.The land is inventory in the hands of Coast Corporation.Coast Corporation must recognize

Accepted Answer

A)  no gain. 
B)  $100,000 of ordinary income. 
C)  $100,000 of long-term capital gain. 
D)  $200,000 of ordinary income. 
A)  no gain. 
B)  $100,000 of ordinary income. 
C)  $100,000 of long-term capital gain. 
D)  $200,000 of ordinary income.

Question 10

Barbara owns 100 shares of Bond Corporation stock with a basis of $40,000.Barbara receives two liquidating distributions,including $16,000 paid last year and $20,000 paid in the current year.An additional distribution of an undetermined amount is expected next year.On last year's tax return,Barbara can recognize a loss of

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $4,000. 
D)  $14,000. 
A)  $0. 
B)  $1,000. 
C)  $4,000. 
D)  $14,000.

Question 11

Identify which of the following statements is true.

Accepted Answer

A)  The Sec. 332 nonrecognition rules apply to the parent corporation when a subsidiary corporation transfers property to the parent corporation in payment of the subsidiary's debt obligation. 
B)  A subsidiary corporation is prevented from recognizing gain or loss when transferring property to its parent corporation in satisfaction of an indebtedness it owes to the parent corporation as part of its complete liquidation. 
C)  Nonrecognition of gain or loss rules apply to a subsidiary corporation when, pursuant to its complete liquidation, the subsidiary transfers property to a third-party creditor. 
D)  All of the above are false. 
A)  The Sec. 332 nonrecognition rules apply to the parent corporation when a subsidiary corporation transfers property to the parent corporation in payment of the subsidiary's debt obligation. 
B)  A subsidiary corporation is prevented from recognizing gain or loss when transferring property to its parent corporation in satisfaction of an indebtedness it owes to the parent corporation as part of its complete liquidation. 
C)  Nonrecognition of gain or loss rules apply to a subsidiary corporation when, pursuant to its complete liquidation, the subsidiary transfers property to a third-party creditor. 
D)  All of the above are false.

Question 12

Parent Corporation,which operates an electric utility,created a 100%-owned corporation,Subsidiary that built and managed an office building.Assume the two corporations have filed separate tax returns for a number of years.The utility occupied two floors of the office building,and Subsidiary offered the other ten floors for lease.Only 25% of the total rental space was leased because of the high crime rate in the area surrounding the building.Rental income was insufficient to cover the mortgage payments,and Subsidiary filed for bankruptcy because of the poor prospects.Subsidiary's assets were taken over by the mortgage lender.Parent lost its entire $500,000 investment.At the time Subsidiary was liquidated,another $100,000 of debts remained unpaid for the general creditors,which included a $35,000 account payable to Parent.What tax issues should Parent and Subsidiary consider with respect to the bankruptcy and liquidation of Subsidiary?

Accepted Answer

The managements of Parent and Subsidiary

Question 13

Moya Corporation adopted a plan of liquidation last year.All but a nominal amount of Moya's assets are distributed to its shareholders within the year.Which of the following statements is not true?

Accepted Answer

A)  The liquidation of Moya Corporation means the corporation has undergone dissolution. 
B)  Moya Corporation retains its state charter. 
C)  Moya Corporation's existence is preserved. 
D)  Moya Corporation has been liquidated for tax purposes. 
A)  The liquidation of Moya Corporation means the corporation has undergone dissolution. 
B)  Moya Corporation retains its state charter. 
C)  Moya Corporation's existence is preserved. 
D)  Moya Corporation has been liquidated for tax purposes.

Question 14

Under Illinois Corporation's plan of liquidation,the corporation distributes land to one of its shareholders,Springer.The land,which is used in Illinois trade or business,has a $20,000 adjusted basis and a $60,000 FMV on the distribution date.What are the tax consequences of this distribution to Illinois and Springer?

Accepted Answer

Illinois Corporation recognizes a $40,00

Question 15

A subsidiary must recognize depreciation recapture income when the subsidiary is liquidated into the parent.

Accepted Answer

A) True 
 B)False

Question 16

If a liquidating subsidiary corporation primarily has loss property to distribute,the parent corporation should

Accepted Answer

A)  follow Sec. 332 rules. 
B)  avoid Sec. 332 rules. 
C)  follow Sec. 332 rules but avoid Sec. 337. 
D)  none of the above 
A)  follow Sec. 332 rules. 
B)  avoid Sec. 332 rules. 
C)  follow Sec. 332 rules but avoid Sec. 337. 
D)  none of the above

Question 17

Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money and other property having a $6,000 FMV.Juan's basis in his Riverwalk stock is $8,000.Upon liquidation,Juan must recognize a gain of

Accepted Answer

A)  0. 
B)  $2,000. 
C)  $3,000. 
D)  $11,000. 
A)  0. 
B)  $2,000. 
C)  $3,000. 
D)  $11,000.

Question 18

A Sec.332 liquidation requires a complete statement be filed with the distributee's tax return

Accepted Answer

A)  when a liquidating distribution is received. 
B)  when the liquidation plan is adopted. 
C)  when the liquidation is compiled. 
D)  No statement is required with the return. 
A)  when a liquidating distribution is received. 
B)  when the liquidation plan is adopted. 
C)  when the liquidation is compiled. 
D)  No statement is required with the return.

Question 19

When a subsidiary corporation is liquidated into its parent corporation under a formal plan of liquidation,the distributions must take place within

Accepted Answer

A)  a six-month period. 
B)  a 12-month period. 
C)  the current and next tax years. 
D)  the current and next three tax years. 
A)  a six-month period. 
B)  a 12-month period. 
C)  the current and next tax years. 
D)  the current and next three tax years.

Question 20

Identify which of the following statements is true.

Accepted Answer

A)  A loss recognized by a shareholder upon complete liquidation of a corporation may not qualify for ordinary loss treatment if the stock is Sec. 1244 stock. 
B)  The loss that is recognized by an individual shareholder on the liquidation of a corporation is a capital loss, up to certain limits, if the stock is Sec. 1244 stock. 
C)  The loss recognized by a corporate shareholder on the worthlessness of the controlled subsidiary's stock is an ordinary loss. 
D)  All of the above are false. 
A)  A loss recognized by a shareholder upon complete liquidation of a corporation may not qualify for ordinary loss treatment if the stock is Sec. 1244 stock. 
B)  The loss that is recognized by an individual shareholder on the liquidation of a corporation is a capital loss, up to certain limits, if the stock is Sec. 1244 stock. 
C)  The loss recognized by a corporate shareholder on the worthlessness of the controlled subsidiary's stock is an ordinary loss. 
D)  All of the above are false.

Identify which of the following statements is true.

Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person.

Identify which of the following statements is true.

In a complete liquidation,a liability assumed by a shareholder reduces the shareholder's amount realized.

Identify which of the following statements is true.

Lake City Corporation owns all 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.Columbia's gain with respect to the distribution will be

Under a plan of complete liquidation,Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William,a 25% shareholder.William has a $200,000 basis in his Coast stock.The land is inventory in the hands of Coast Corporation.Coast Corporation must recognize

Identify which of the following statements is true.

Moya Corporation adopted a plan of liquidation last year.All but a nominal amount of Moya's assets are distributed to its shareholders within the year.Which of the following statements is not true?

A subsidiary must recognize depreciation recapture income when the subsidiary is liquidated into the parent.

If a liquidating subsidiary corporation primarily has loss property to distribute,the parent corporation should

Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money and other property having a $6,000 FMV.Juan's basis in his Riverwalk stock is $8,000.Upon liquidation,Juan must recognize a gain of

A Sec.332 liquidation requires a complete statement be filed with the distributee's tax return

When a subsidiary corporation is liquidated into its parent corporation under a formal plan of liquidation,the distributions must take place within

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

Identify which of the following statements is true.

Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person.

Identify which of the following statements is true.

In a complete liquidation,a liability assumed by a shareholder reduces the shareholder's amount realized.

Identify which of the following statements is true.

Lake City Corporation owns all 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.Columbia's gain with respect to the distribution will be

Under a plan of complete liquidation,Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William,a 25% shareholder.William has a $200,000 basis in his Coast stock.The land is inventory in the hands of Coast Corporation.Coast Corporation must recognize

Identify which of the following statements is true.

Moya Corporation adopted a plan of liquidation last year.All but a nominal amount of Moya's assets are distributed to its shareholders within the year.Which of the following statements is not true?

A subsidiary must recognize depreciation recapture income when the subsidiary is liquidated into the parent.

If a liquidating subsidiary corporation primarily has loss property to distribute,the parent corporation should

Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money and other property having a $6,000 FMV.Juan's basis in his Riverwalk stock is $8,000.Upon liquidation,Juan must recognize a gain of

A Sec.332 liquidation requires a complete statement be filed with the distributee's tax return

When a subsidiary corporation is liquidated into its parent corporation under a formal plan of liquidation,the distributions must take place within

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