Question 1

The yearly § 382 limitation is computed by multiplying the ____________________ of the loss corporation's stock on the change date by the ____________________. For the ____________________, the § 382 limitation must be multiplied by the fraction equal to the number of days remaining in the year divided by days in the year.

Accepted Answer

The answer of The yearly § 382 limitation is computed...

Question 2

When a "Type F" reorganization includes a change from a taxable corporation to a 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 3

The acquiring corporation in a "Type G" reorganization must reduce the tax attributes carried over to it to the extent of the ____________________ relief.

Accepted Answer

The answer of The acquiring corporation in a "Type G"...

Question 4

The dollar value in most corporate reorganizations is ____________________. Thus, the ____________________ often dictates the form of the restructurings.

Accepted Answer

The answer of The dollar value in most corporate reorganizations...

Question 5

Grebe Corporation is a car dealership that has been in existence for 10 years. It has also been in the car leasing business for 6 years. Both businesses produce substantial amounts of cash, and Grebe has been investing this cash in mutual funds for the past 10 years. Grebe is interested in separating its businesses. It will create (a) new corporation(s) to receive assets in exchange for stock. Which of the following is correct regarding this transaction?

Accepted Answer

A) Grebe must distribute at least 80% of the new corporation(s) stock to its shareholders in exchange for a proportionate amount of Grebe's stock. If the shareholders do not exchange stock, the transaction receives dividend treatment. 
B) Grebe may create up to 3 new corporations because it has 3 lines of business. If 3 new corporations are created, Grebe ceases to exist because it will have no assets. 
C) The new corporations created will carry over no tax attributes or earnings and profits from Grebe. 
D) Using a split-off "Type D" reorganization, Grebe can transfer the car leasing business to the new corporation and exchange the new corporation stock for some of the Grebe stock held by its shareholders. 
E) All of the above statements are correct.

Question 6

Which of the following statements is correct with regards to liabilities in corporate reorganizations?

Accepted Answer

A) While in a "Type A" merger all the liabilities of the target must be acquired, in a consolidation only general liabilities are transferred. 
B) In a "Type G" reorganization, the target's liabilities rarely are liquidated. 
C) Liabilities are problematic for a "Type C" only when the acquiring corporation transfers other property in addition to common stock. 
D) Long-term liabilities (bonds) can be exchanged tax-free in a "Type E" reorganization, as long as the terms of the bonds are greater than 10 years and the interest rates are identical. 
E) None of the above.

Question 7

Besides the statutory requirements for tax-free treatment for corporate reorganizations, there are several judicial requirements. Which of the following is not a judicial requirement for corporate reorganizations?

Accepted Answer

A) The ownership change doctrine should be met. 
B) The continuity of business enterprise test must be met. 
C) There must be a sound business purpose for the restructuring. 
D) The step transaction doctrine should not apply. 
E) All of the above items are judicial requirements for reorganizations.

Question 8

The ____________________ doctrine treats several transactions as if they were one transaction when they are all integrated. The ____________________ doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.

Accepted Answer

The answer of The ____________________ doctrine treats several transactions as...

Question 9

In each of the following reorganizations, there is an exchange of stock for assets or stock for stock. Indicate for each reorganization the type of stock used for the exchanges, and the minimum percentage of stock that may be used for the restructurings to meet the § 368 requirements.
​
Types: A; B; C; divisive D.

Accepted Answer

The answer of In each of the following reorganizations, there...

Question 10

Provide the formula for the § 382 limitation and demonstrate how the formula is altered for the change year. What is the purpose of the § 382 limitation?

Accepted Answer

The answer of Provide the formula for the § 382...

Question 11

For a "Type C" reorganization, substantially all of the assets means at least ____________________ percent of the net asset value and ____________________ percent of the gross asset value.

Accepted Answer

The answer of For a "Type C" reorganization, substantially all...

Question 12

In which type of corporate reorganization do shareholders receive stock in at least two other corporations, in exchange for all of the stock in the original corporation?

Accepted Answer

A) "Type A" consolidation reorganization. 
B) "Type B" reorganization. 
C) "Type D" spin-off reorganization. 
D) "Type D" split-off reorganization. 
E) Some other type of reorganization.

Question 13

Originally, the Supreme Court decided that corporate reorganizations were substantially continuations of the prior entities and thus should not be subject to taxation.

Accepted Answer

A) True 
 B)False

Question 14

Match the following items with the statements below. Terms may be used more than once.
-Snow Corporation, located in Washington State, establishes Rain Corporation, located in Arizona. Snow then transfers all of its assets to Rain in exchange for all of Snow's stock. After distributing the Rain stock to its shareholders, Snow liquidates.

Accepted Answer

A) Boot 
B) Business credits 
C) Capital gain 
D) Continuity of business enterprise 
E) Continuity of interest
F)Dividend
G)Discount rate
H)Earnings and profits
I)​Federal long-term tax-exempt rate
J)Liability assumption
K)Ordinary gain
L)Ownership change
M)Section 382 limitation​
N)Sound business purpose
O)Step transaction

Question 15

The term "reorganization" refers to any restructuring that will be tax-free under Code section _________________________.

Accepted Answer

The answer of The term "reorganization" refers to any restructuring...

Question 16

Which of the following statements regarding "Type B" reorganizations is true?

Accepted Answer

A) Since a parent-subsidiary relationship is created, the tax attribute carryover limitations are problematic. 
B) The acquisition of liabilities can cause problems when the liabilities of the target are greater than 20% of the total consideration and the acquiring owned target stock prior to the "Type B" reorganization. 
C) The acquisition of common and preferred target stock by the acquiring can be directly from the shareholders or from the target corporation. 
D) The acquiring corporation must distribute the target stock it obtains to its shareholders. The acquiring shareholders do not always have to turn in acquiring stock in exchange for the target stock. 
E) All of the above statements are true.

Question 17

Match the following items with the statements below. Terms may be used more than once.
-When the transactions are so interdependent that the accomplishment of one would be fruitless without the completion of the series.

Accepted Answer

A) Boot 
B) Business credits 
C) Capital gain 
D) Continuity of business enterprise 
E) Continuity of interest
F)Dividend
G)Discount rate
H)Earnings and profits
I)​Federal long-term tax-exempt rate
J)Liability assumption
K)Ordinary gain
L)Ownership change
M)Section 382 limitation​
N)Sound business purpose
O)Step transaction

Question 18

When the § 382 limitation is evoked, the acquiring corporation is limited in its use of the tax loss carryover of the loss corporation. The limitation is based on the net present value of the loss corporation using the Federal long-term discount rate.

Accepted Answer

A) True 
 B)False

Question 19

Match the following items with the statements below. Terms may be used more than once.
-Jones Corporation is insolvent and under state law protection from its creditors. Its assets are transferred to Smith Corporation in exchange for all of its stock. The stock is distributed to the creditors of Jones, and the shareholders only receive stock valued at 10% of their stock.

Accepted Answer

A) Boot 
B) Business credits 
C) Capital gain 
D) Continuity of business enterprise 
E) Continuity of interest
F)Dividend
G)Discount rate
H)Earnings and profits
I)​Federal long-term tax-exempt rate
J)Liability assumption
K)Ordinary gain
L)Ownership change
M)Section 382 limitation​
N)Sound business purpose
O)Step transaction

Question 20

Weaver Corporation has net assets valued at $800,000 and an NOL of $250,000. On September 30 of the current year, Weaver is acquired by Loom Corporation, a calendar year taxpayer, in a restructuring qualifying as a tax-free reorganization. Weaver shareholders receive 30% of Loom's shares in exchange for all of their Weaver stock. Assuming that the Federal long-term tax-exempt rate is 8%, what is the maximum amount of Weaver's NOL available to Loom in the current year?

Accepted Answer

A) $250,000 
B) $240,000 
C) $75,000 
D) $64,000 
E) None of the above

Exam 7: Corporations Reorganizations

The yearly § 382 limitation is computed by multiplying the of the loss corporation's stock on the change date by the . For the , the § 382 limitation must be multiplied by the fraction equal to the number of days remaining in the year divided by days in the year.

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

The acquiring corporation in a "Type G" reorganization must reduce the tax attributes carried over to it to the extent of the ____________________ relief.

The dollar value in most corporate reorganizations is . Thus, the often dictates the form of the restructurings.

Which of the following statements is correct with regards to liabilities in corporate reorganizations?

Besides the statutory requirements for tax-free treatment for corporate reorganizations, there are several judicial requirements. Which of the following is not a judicial requirement for corporate reorganizations?

The doctrine treats several transactions as if they were one transaction when they are all integrated. The doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.

Provide the formula for the § 382 limitation and demonstrate how the formula is altered for the change year. What is the purpose of the § 382 limitation?

For a "Type C" reorganization, substantially all of the assets means at least percent of the net asset value and percent of the gross asset value.

In which type of corporate reorganization do shareholders receive stock in at least two other corporations, in exchange for all of the stock in the original corporation?

Originally, the Supreme Court decided that corporate reorganizations were substantially continuations of the prior entities and thus should not be subject to taxation.

The term "reorganization" refers to any restructuring that will be tax-free under Code section _________________________.

Which of the following statements regarding "Type B" reorganizations is true?

Match the following items with the statements below. Terms may be used more than once. -When the transactions are so interdependent that the accomplishment of one would be fruitless without the completion of the series.

When the § 382 limitation is evoked, the acquiring corporation is limited in its use of the tax loss carryover of the loss corporation. The limitation is based on the net present value of the loss corporation using the Federal long-term discount rate.