Question 1

When a corporation has an ownership change,the § 382 limitation may come into play.Explain the § 382 limitation.

Accepted Answer

The § 382 limitation applies to tax attr

Question 2

The divisive "Type D" reorganization requires that acquiring corporation form a subsidiary to receive all or part of target corporation's assets in exchange for stock. After the transaction,a parent-subsidiary controlled group exists.

Accepted Answer

A) True 
 B)False

Question 3

An advantage of a "Type A" reorganization over a "Type B" or "Type C" is that only ___________________ percent of the consideration needs to be ___________________ or ___________________ stock.

Accepted Answer

The answer of An advantage of a "Type A" reorganization...

Question 4

A "Type E" reorganization has tax implications for only the security or stockholders and no tax affect on the corporation involved.

Accepted Answer

A) True 
 B)False

Question 5

Last year,Loss Corporation transferred all of its assets (value of $5.2 million and basis of $4.7 million)and liabilities ($1.7 million)to Gain Corporation in exchange for 40% of Gain's voting stock.Loss then liquidated.At the time of the reorganization,Loss had NOLs and excess credits that may be carried forward.For the current year,Gain has taxable income of $980,000 before considering the $375,000 NOL and $30,000 in excess credits carried to this year.If the Federal long-term tax-exempt rate was 10% at the time of the reorganization,what is the amount of NOL and credit carryovers Gain Corporation may utilize in the current year?

Accepted Answer

The amount of credit and NOL carryovers

Question 6

The basis in the acquiring stock received by the target shareholders is the vehicle for ensuring that any postponed gain is recognized when the stock is sold at a later date.

Accepted Answer

A) True 
 B)False

Question 7

For the last 10 years,Contra Corporation has owned two plants for manufacturing picture frames.One plants is located in an urban area while the other is in the country.There have been some protests at the urban plant regarding air pollution.Therefore,Contra decides to create a new corporation,called Alpha,and place the assets of the urban plant into Alpha in exchange for all of Alpha's stock.Contra distributes this stock proportionately to its shareholders in exchange for 40% of their Contra stock.

Accepted Answer

A) This transaction qualifies as an acquisitive "Type D" reorganization. 
B) This transaction qualifies as a spin-off "Type D" reorganization. 
C) This transaction qualifies as a split-up "Type D" reorganization. 
D) This transaction does not qualify as a reorganization, because Contra does not liquidate after the transaction. 
E) None of the above statements is correct. 
A) This transaction qualifies as an acquisitive "Type D" reorganization. 
B) This transaction qualifies as a spin-off "Type D" reorganization. 
C) This transaction qualifies as a split-up "Type D" reorganization. 
D) This transaction does not qualify as a reorganization, because Contra does not liquidate after the transaction. 
E) None of the above statements is correct.

Question 8

Shareholders receiving other property as a part of a corporate reorganization may be treated as having their stock redeemed under § 302(b)and be in the adverse position of being treated as having sold a capital asset.

Accepted Answer

A) True 
 B)False

Question 9

In which type of reorganization could bonds and other liabilities be exchanged for stock and not cause a recognized gain or loss?

Accepted Answer

A) A "Type C" reorganization. 
B) An acquisitive "Type D" reorganization. 
C) A "Type E" reorganization. 
D) A "Type G" reorganization. 
E) None of the above. 
A) A "Type C" reorganization. 
B) An acquisitive "Type D" reorganization. 
C) A "Type E" reorganization. 
D) A "Type G" reorganization. 
E) None of the above.

Question 10

On June 30,Target Corporation transfers all of its assets to Acquiring Corporation in exchange for 25% of its common voting stock.At the time of the reorganization,Target has assets valued at $1 million (basis of $600,000)and its earnings and profits account shows a deficit of $250,000.Acquiring's earnings and profits as of June 30 were $320,000.Due to the reorganization,Acquiring has an NOL for the current year of $80,000.Acquiring still declares its usual dividends of $100,000,paid on June 30 and December 30 ($200,000 of total dividends).
a.How are the Acquiring shareholders taxed on the distribution?
b.What portion of the current-year NOL may be carried back to prior Acquiring and/or Target tax years?

Accepted Answer

a.The $200,000 distributions are taxed t

Question 11

The end result of a "Type A" merger,"Type C," and an acquisitive "Type D" are basically the same.Compare the consideration,requirements,and mechanics of these three types of reorganizations.

Accepted Answer

While a "Type A" merger,"Type

Question 12

Jupiter Corporation acquires all of Titian Corporation's stock in exchange for its voting stock.Iris received 1,000 shares of Jupiter valued at $50,000 for her 8,000 shares of Titian that cost Iris $100,000 five years ago.In addition to the Jupiter stock,she receives a $30,000 bond.How does Iris treat this transaction for tax purposes?

Accepted Answer

A) Iris recognizes a loss of $50,000. Her Jupiter stock basis is $50,000. 
B) Iris recognizes a loss of $20,000. Her Jupiter stock basis is $80,000. 
C) Iris recognizes a $20,000 loss and a $25,000 gain. Her Jupiter stock basis is $105,000. 
D) Iris realizes a $20,000 loss that is not recognized. Her Jupiter stock basis is $120,000. 
E) None of the above. 
A) Iris recognizes a loss of $50,000. Her Jupiter stock basis is $50,000. 
B) Iris recognizes a loss of $20,000. Her Jupiter stock basis is $80,000. 
C) Iris recognizes a $20,000 loss and a $25,000 gain. Her Jupiter stock basis is $105,000. 
D) Iris realizes a $20,000 loss that is not recognized. Her Jupiter stock basis is $120,000. 
E) None of the above.

Question 13

Since a "Type F" reorganization includes a change from a taxable corporation to flow-through entity,the original corporation stock loses its § 1244 status and earnings and profits do not carry over.

Accepted Answer

A) True 
 B)False

Question 14

Black Corporation has a net worth of $500,000 and an NOL of $200,000.The majority shareholder (owns 90%)would like to sell all of her stock as she thinks the corporation is not a good investment.The minority shareholder believes that he can turn the company around in five years and is willing to buy a majority interest.It is important to the minority shareholder that the ability to use the NOL is not limited in anyway.Suggest a method for the minority shareholder to acquire the majority's stock and avoid any § 382 limitation.

Accepted Answer

If there is a greater than 50 percentage

Question 15

What type of reorganization is affected in each of the following independent transactions?
a. "A" reorganization, merger
b. "A" reorganization, consolidation
c. "B" reorganization
d. "C" reorganization
e. Acquisitive "D" reorganization
f. "D" reorganization, spin-off
g. "D" reorganization, split-off
h. "D" reorganization, split-up
i. "E" reorganization
j. "F" reorganization
k. "G" reorganization
l. Taxable transaction
-Red and Blue Corporations are merged under state law into a new corporation,White Corporation.The White voting common (70% of value)and nonvoting preferred stocks (30% of value)are distributed to the Red and Blue shareholders in exchange for all of their voting common and nonvoting preferred stock.Red and Blue then liquidate.

Accepted Answer

The answer of What type of reorganization is affected in...

Question 16

A present value analysis is required to compute the § 382 limitation for any given year.

Accepted Answer

A) True 
 B)False

Question 17

When a corporation acquires property from a target corporation,it also acquires the target's ____________________ attributes.Section ____________________ determines which attributes are carried over to the successor,and section ____________________ limits the use of those attributes.

Accepted Answer

The answer of When a corporation acquires property from a...

Question 18

In a ___________________ reorganization,liabilities can be treated as other property when the acquiring corporation does not use solely ___________________ as consideration.

Accepted Answer

The answer of In a ___________________ reorganization,liabilities can be treated...

Question 19

Match the following items with the statements below. Terms may be used more than once.
a.Capital gain
b.Continuity of business enterprise
c.Continuity of interest
d.Dividend
e.Equity change
f.Liability assumption
g.Ordinary gain
h.Ownership change
i.Not recognized
j.Sound business purpose
k.Step transaction
-Causes the § 382 limitation to apply to loss carryovers and excess credits acquired from a loss corporation.

Accepted Answer

The answer of Match the following items with the statements...

Question 20

The tax treatment of reorganizations almost parallels the treatment given to related party exchanges.

Accepted Answer

A) True 
 B)False

When a corporation has an ownership change,the § 382 limitation may come into play.Explain the § 382 limitation.

The divisive "Type D" reorganization requires that acquiring corporation form a subsidiary to receive all or part of target corporation's assets in exchange for stock. After the transaction,a parent-subsidiary controlled group exists.

An advantage of a "Type A" reorganization over a "Type B" or "Type C" is that only _________ percent of the consideration needs to be _ or ___________ stock.

A "Type E" reorganization has tax implications for only the security or stockholders and no tax affect on the corporation involved.

The basis in the acquiring stock received by the target shareholders is the vehicle for ensuring that any postponed gain is recognized when the stock is sold at a later date.

Shareholders receiving other property as a part of a corporate reorganization may be treated as having their stock redeemed under § 302(b)and be in the adverse position of being treated as having sold a capital asset.

In which type of reorganization could bonds and other liabilities be exchanged for stock and not cause a recognized gain or loss?

The end result of a "Type A" merger,"Type C," and an acquisitive "Type D" are basically the same.Compare the consideration,requirements,and mechanics of these three types of reorganizations.

Since a "Type F" reorganization includes a change from a taxable corporation to flow-through entity,the original corporation stock loses its § 1244 status and earnings and profits do not carry over.

A present value analysis is required to compute the § 382 limitation for any given year.

When a corporation acquires property from a target corporation,it also acquires the target's attributes.Section determines which attributes are carried over to the successor,and section limits the use of those attributes.

In a _ reorganization,liabilities can be treated as other property when the acquiring corporation does not use solely _ as consideration.

The tax treatment of reorganizations almost parallels the treatment given to related party exchanges.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, operation, and Basis

Partnerships: Distributions, transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 7: Corporations: Reorganizations

When a corporation has an ownership change,the § 382 limitation may come into play.Explain the § 382 limitation.

The divisive "Type D" reorganization requires that acquiring corporation form a subsidiary to receive all or part of target corporation's assets in exchange for stock. After the transaction,a parent-subsidiary controlled group exists.

An advantage of a "Type A" reorganization over a "Type B" or "Type C" is that only ___________________ percent of the consideration needs to be ___________________ or ___________________ stock.

A "Type E" reorganization has tax implications for only the security or stockholders and no tax affect on the corporation involved.

The basis in the acquiring stock received by the target shareholders is the vehicle for ensuring that any postponed gain is recognized when the stock is sold at a later date.

Shareholders receiving other property as a part of a corporate reorganization may be treated as having their stock redeemed under § 302(b)and be in the adverse position of being treated as having sold a capital asset.

In which type of reorganization could bonds and other liabilities be exchanged for stock and not cause a recognized gain or loss?

The end result of a "Type A" merger,"Type C," and an acquisitive "Type D" are basically the same.Compare the consideration,requirements,and mechanics of these three types of reorganizations.

Since a "Type F" reorganization includes a change from a taxable corporation to flow-through entity,the original corporation stock loses its § 1244 status and earnings and profits do not carry over.

A present value analysis is required to compute the § 382 limitation for any given year.

When a corporation acquires property from a target corporation,it also acquires the target's ____________________ attributes.Section ____________________ determines which attributes are carried over to the successor,and section ____________________ limits the use of those attributes.

In a ___________________ reorganization,liabilities can be treated as other property when the acquiring corporation does not use solely ___________________ as consideration.

The tax treatment of reorganizations almost parallels the treatment given to related party exchanges.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, operation, and Basis

Partnerships: Distributions, transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

An advantage of a "Type A" reorganization over a "Type B" or "Type C" is that only _________ percent of the consideration needs to be _ or ___________ stock.

When a corporation acquires property from a target corporation,it also acquires the target's attributes.Section determines which attributes are carried over to the successor,and section limits the use of those attributes.

In a _ reorganization,liabilities can be treated as other property when the acquiring corporation does not use solely _ as consideration.