Question 1

Which of the following statements best describes the tax consequences of a section 338 election?

Accepted Answer

A)  Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired. 
B)  Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquired. 
C)  Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired. 
D)  Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquired. 
A)  Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired. 
B)  Gain or loss is recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquired. 
C)  Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a stepped-up basis in the assets acquired. 
D)  Gain or loss is not recognized by the acquired corporation on the deemed sale of its assets and the buyer gets a carryover basis in the assets acquired. A

Question 2

Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

Accepted Answer

A)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's fair market value. 
B)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder. 
C)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property. 
D)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property. 
A)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's fair market value. 
B)  If the basis of a property transferred to a corporation under section 351 exceeds its fair market value, the corporation will always take a tax basis in the property equal to the property's tax basis in the hands of the shareholder. 
C)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate fair market value of the property. 
D)  If the aggregate basis of all property transferred to a corporation under section 351 exceeds its aggregate fair market value, the aggregate tax basis of the property in the hands of the corporation cannot exceed the aggregate tax basis of the property. C

Question 4

Billie transferred her 20 percent interest to Jean Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $200,000. Billie's basis in the Jean stock was $100,000. The land had a basis to Jean Company of $400,000. What amount of loss does Jean recognize in the exchange and what is Billie's basis in the land she receives? Billie is not considered a related party to Jean Company.

Accepted Answer

A)  $200,000 loss recognized by Jean and a basis in the land of $200,000 to Billie. 
B)  $200,000 loss recognized by Jean and a basis in the land of $400,000 to Billie. 
C)  No loss recognized by Jean and a basis in the land of $200,000 to Billie. 
D)  No loss recognized by Jean and a basis in the land of $400,000 to Billie. 
A)  $200,000 loss recognized by Jean and a basis in the land of $200,000 to Billie. 
B)  $200,000 loss recognized by Jean and a basis in the land of $400,000 to Billie. 
C)  No loss recognized by Jean and a basis in the land of $200,000 to Billie. 
D)  No loss recognized by Jean and a basis in the land of $400,000 to Billie.

Question 5

Rich and Rita propose to have their corporation, Big Blue, acquire another corporation, Green Company, in a stock-for-stock Type B acquisition. The sole shareholder of Green, Mark Dee, will receive $500,000 of Big Blue voting stock in the transaction. Mark's tax basis in his Green stock is $100,000. What is Mark's tax basis in the Big Blue stock he receives in the exchange and what is Big Blue's basis in the Green stock it receives in return?

Accepted Answer

Mark's basis in the Big Blue stock is $1

Question 6

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

Accepted Answer

A) True 
 B)False

Question 7

Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?

Accepted Answer

A)  $600 
B)  $550 
C)  $500 
D)  $450 
A)  $600 
B)  $550 
C)  $500 
D)  $450

Question 8

To meet the control test under section 351, taxpayers transferring property to a corporation must in aggregate own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

Accepted Answer

A)  Continuity of interest requires each shareholder to receive at least 40 percent of the consideration received in equity of the acquirer. 
B)  Continuity of interest requires shareholders in the aggregate to receive at least 40 percent of the consideration received in equity of the acquirer. 
C)  Continuity of interest requires each shareholder to receive at least 80 percent of the consideration received in equity of the acquirer. 
D)  Continuity of interest requires shareholders in the aggregate to receive at least 80 percent of the consideration received in equity of the acquirer. 
A)  Continuity of interest requires each shareholder to receive at least 40 percent of the consideration received in equity of the acquirer. 
B)  Continuity of interest requires shareholders in the aggregate to receive at least 40 percent of the consideration received in equity of the acquirer. 
C)  Continuity of interest requires each shareholder to receive at least 80 percent of the consideration received in equity of the acquirer. 
D)  Continuity of interest requires shareholders in the aggregate to receive at least 80 percent of the consideration received in equity of the acquirer.

Question 10

Maria defers $100 of gain realized in a section 351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

Accepted Answer

A) True 
 B)False

Question 11

In December 2017, Zeb incurred a $100,000 loss on the sale of Pike Corporation stock that he purchased in 2010. The stock satisfied all of the §1244 stock requirements at the time of issue. In addition, Zeb reported a long-term capital gain of $40,000 in 2017. Zeb is single. How much of the loss can Zeb deduct in 2017, and what is the character of the loss?

Accepted Answer

$50,000 ordinary loss under §1244, $40,0

Question 12

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

Accepted Answer

A) True 
 B)False

Question 13

Zhao incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases.
   The corporation also assumed a mortgage of $50,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $330,000. The transaction met the requirements to be tax-deferred under §351.
a. What amount of gain or loss does Zhao realize on the transfer of the property to her corporation?
b. What amount of gain or loss does Zhao recognize on the transfer of the property to her corporation?
c. What is the corporation's adjusted basis in each of the assets received in the exchange?

Accepted Answer

a. $70,000 gain
b. Zhao does not recogni

Question 14

Juan transferred 100 percent of his stock in Rosa Company to Azul Corporation in a Type B stock-for stock exchange. In exchange, he received stock in Azul with a fair market value of $1,000,000. Juan's tax basis in the Rosa stock was $400,000. What amount of gain does Juan recognize in the exchange and what is his basis in the Azul stock he receives?

Accepted Answer

A)  $600,000 gain recognized and a basis in Azul stock of $400,000. 
B)  No gain recognized and a basis in Azul stock of $400,000. 
C)  $600,000 gain recognized and a basis in Azul stock of $1,000,000. 
D)  No gain recognized and a basis in Azul stock of $1,000,000. 
A)  $600,000 gain recognized and a basis in Azul stock of $400,000. 
B)  No gain recognized and a basis in Azul stock of $400,000. 
C)  $600,000 gain recognized and a basis in Azul stock of $1,000,000. 
D)  No gain recognized and a basis in Azul stock of $1,000,000.

Question 15

Keegan incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases.
   The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Keegan.
Assuming the gain or loss realized in this problem is deferred under §351, what is Keegan's basis in the stock he receives in his corporation?

Accepted Answer

$164,000
The stock t

Question 16

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. In all cases, the assumed liability will be treated as boot received by Jane.

Accepted Answer

A) True 
 B)False

Question 17

Robin transferred her 60 percent interest to Cardinal Company as part of a complete liquidation of the company. In the exchange, she received land with a fair market value of $800,000. Robin's basis in the Cardinal stock was $900,000. The land had a basis to Cardinal Company of $1,000,000. What amount of loss does Cardinal recognize in the exchange and what is Robin's basis in the land she receives? The distribution was non pro rata to Robin, a related person.

Accepted Answer

A)  $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
B)  $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin. 
C)  No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
D)  No loss recognized by Cardinal and a basis in the land of $800,000 to Robin. 
A)  $200,000 loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
B)  $200,000 loss recognized by Cardinal and a basis in the land of $800,000 to Robin. 
C)  No loss recognized by Cardinal and a basis in the land of $1,000,000 to Robin. 
D)  No loss recognized by Cardinal and a basis in the land of $800,000 to Robin.

Question 18

A section 338 transaction is a stock acquisition treated as an asset acquisition based on an election made by the acquirer.

Accepted Answer

A) True 
 B)False

Question 19

Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Accepted Answer

A)  $800 
B)  $600 
C)  $550 
D)  $450 
A)  $800 
B)  $600 
C)  $550 
D)  $450

Question 20

Which of the following statements does not describe a requirement that must be met in a tax-deferred forward triangular merger?

Accepted Answer

A)  The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target corporation shareholders. 
B)  The acquirer must hold substantially all of the target corporation's properties after the merger. 
C)  The continuity of business enterprise test must be met with respect to the target corporation. 
D)  The target corporation shareholders must receive voting stock in the acquiring corporation. 
A)  The 40 percent continuity of interest test must be met with respect to the stock transferred from the acquisition corporation to the target corporation shareholders. 
B)  The acquirer must hold substantially all of the target corporation's properties after the merger. 
C)  The continuity of business enterprise test must be met with respect to the target corporation. 
D)  The target corporation shareholders must receive voting stock in the acquiring corporation.

Which of the following statements best describes the tax consequences of a section 338 election?

Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

To meet the control test under section 351, taxpayers transferring property to a corporation must in aggregate own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer.

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

Maria defers $100 of gain realized in a section 351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. In all cases, the assumed liability will be treated as boot received by Jane.

A section 338 transaction is a stock acquisition treated as an asset acquisition based on an election made by the acquirer.

Which of the following statements does not describe a requirement that must be met in a tax-deferred forward triangular merger?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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Exam 19: Corporate Formation, Reorganization, and Liquidation

Which of the following statements best describes the tax consequences of a section 338 election?

Continuity of interest as it relates to a tax reorganization focuses on the aggregate equity received by the shareholders of the target corporation in the transaction.

Which of the following statements best describes the "built-in loss" rules that apply to property transferred to a corporation under section 351?

A taxpayer always will have a tax basis in boot received in a section 351 transaction equal to its fair market value.

To meet the control test under section 351, taxpayers transferring property to a corporation must in aggregate own 80 percent or more of the corporation's voting stock and 80 percent of each class of nonvoting stock after the transfer.

Which of the following statements best describes the continuity of interest principle as it applies to a tax-deferred acquisition?

Maria defers $100 of gain realized in a section 351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

The requirements for tax deferral in a forward triangular merger and a reverse triangular merger are the same.

M Corporation assumes a $200 liability attached to property transferred to it by Jane in a section 351 transaction. In all cases, the assumed liability will be treated as boot received by Jane.

A section 338 transaction is a stock acquisition treated as an asset acquisition based on an election made by the acquirer.

Which of the following statements does not describe a requirement that must be met in a tax-deferred forward triangular merger?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters